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A risky portfolio has an expected rate of return of 20% and a standard deviation of returns of 10%. The T-bill rate of return is
A risky portfolio has an expected rate of return of 20% and a standard deviation of returns of 10%. The T-bill rate of return is 5%. The T-bill is truly a risk-free asset and its movements are independent of the movements of all risky portfolios. (In other words, the T-bill is independent of the risky portfolio). If you invest 35% of your money in the risky portfolio and 65% of your money in the T-bill:
a) what is the expected rate of return on your portfolio?
b) what is the standard deviation of returns of your portfolio?
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