What is the expected rate of return on complete portfolio

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You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 37%. The T-bill rate is 5%.

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 17%.

a. What is the investment proportion, y?

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

Reference no: EM131978463

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