In: Finance
Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 42%. The T-bill rate is 4%. |
Your risky portfolio includes the following investments in the given proportions: |
Stock A | 26 | % |
Stock B | 35 | % |
Stock C | 39 | % |
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 16%. |
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 |