6

Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-note rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-note cash fund. Suppose the client prefers to invest in your portfolio a proportion (y) that maximises the expected return on the overall portfolio subject to the constraint that the overall standard deviation will not exceed 20%. What is the proportion y? List your answer in percent, rounded to 2 decimal places (i.e. 3.29, not 0.0329). Do not use a percent (\%) sign. The margin for error is 0.02