An investor chooses to invest 60% of a portfolio in a risky fund and 40% in a T-bill fund. The expected return of the risky portfolio is 17% and the standard deviation is 27%. The T-bill rate is 7%.

What is the Sharpe ratio of the risky portfolio and the investors overall portfolio?

Suppose the investor decides to invest a proportion (y) of his total budget in the risky portfolio so that his overall portfolio will have an expected return of 10%.

a. What is the proportion that must be invested in T-bills?

b. What is the standard deviation of the rate of return on the investors portfolio?