Risky portfolio with an expected rate of return

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Reference no: EM131450978

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 40%. The T-bill rate is 5%.

Your risky portfolio includes the following investments in the given proportions:

Stock A 24 %

Stock B 33 %

Stock C 43 %

Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 13%.

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

Proportion y ____

b. What are your client's investment proportions in your three stocks and the T-bill fund? (Round your intermediate calculations and final answers to 2 decimal places.)

Security Investment Proportions

T-Bills ____%

Stock A ____%

Stock B ____%

Stock C ____%

c. What is the standard deviation of the rate of return on your client's portfolio? (Round your intermediate calculations and final answer to 2 decimal places.)

Standard deviation ____% per year

Reference no: EM131450978

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