14.

A)Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 39%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions:

Stock A 23%

Stock B 32%

Stock C 45%

Your client decides to invest in your risky portfolio with a proportion (y) of his investment budget with the rest in a T-bill (MMF) money market fund so that the overall portfolio will have an expected return of 9%.

What is the proportion y?

	A.	45%
	B.	25%
	C.	60%
	D.	50%

B)

A municipal bond carries a coupon rate of 7.85% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 25% combined tax bracket?

	A.	10.46%
	B.	11.15%
	C.	12.76%
	D.	9.97%