Investment proportions of the complete portfolio

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Suppose you manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 20%. The T-bill rate is 2%. Also, suppose your risky portfolio includes the following assets in the given proportions:

Stock A 10%
Stock B 40%
Stock C 20%
Stock D 30%

Suppose your client comes to you and asks you to help her make a portfolio with expected return of 20%.

1. What fraction (y) will she need to invest in your risky portfolio to obtain this expected return?

2. What are the investment proportions of the complete portfolio?

yT -bill = ?
yA= ?
yB = ?
yC = ?
yD = ?

3. Explain how you will allocate your assets based on the weights above ?

4. What is the standard deviation of the rate of return on your client's portfolio? σP =

5. What is the Sharpe ratio of your client's portfolio?

Reference no: EM132795913

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