Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 33%. The T-bill rate is
| Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 33%. The T-bill rate is 7%. |
| Stock A | 30 | % |
| Stock B | 35 | % |
| Stock C | 35 | % |
| A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 30%. |
a. What is the investment proportion, y?
b.What is the expected rate of return on the overall portfolio?
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Authors: Mike Wright, Geoffrey T. Wood, Alvaro Cuervo-Cazurra, Pei Sun, Ilya Okhmatovskiy, Anna Grosman
1st Edition
0198837364, 978-0198837367
