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Expected rate of return on the complete portfolio

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Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%.

Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 18%.

a. What is the investment proportion, y? (Round your answer to 2 decimal places.)

b. What is the expected rate of return on the complete portfolio?

Reference no: EM132543814

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