You ask your financial advisor to place 40% of your portfolio in a risk-free asset with a 5% return. The rest in a risky portfolio with an expected return of 12% and a standard deviation of 20%.

a) What is the expected return on your portfolio? And what is its standard deviation?

b) If you set your return target at 8%, how much should you invest in the risky portfolio? And in the risk-free asset ?

Answer rating: 100% (QA)

Answer a To find the expected return on the portfolio we can use the weighted average of the returns ... View the full answer