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Assume that you manage a risky portfolio with an expected rate of return of 20% and...

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

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