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6. You manage an equity fund with an expected risk premium of 12% and a standard deviation of 18%. The rate on T-bills is 4%.
6. You manage an equity fund with an expected risk premium of 12% and a standard deviation of 18%. The rate on T-bills is 4%. Your client chooses to invest $80,000 of her portfolio in your equity fund and $20,000 in a T-bill money market fund. a. What is the expected return and standard deviation of return on your clients portfolio? b. What is the reward-to-volatility ratio for your clients portfolio? How does it compare to the same ratio for the equity fund?
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