Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 28%. The T-bill rate is

Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 28%. The T-bill rate is 4%

Stock A 20 %
Stock B 30 %
Stock C 50 %

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 20%.

a. What is the investment proportion, y? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Investment proportion y %

b. What is the expected rate of return on the overall portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Rate of return %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Robonomics Prepare Today For The Jobless Economy Of Tomorrow

Authors: John Crews

1st Edition

1530910463, 978-1530910465

More Books

Students also viewed these Finance questions

Question

Is the reaction e + p n + ve possible? Explain.

Answered: 1 week ago