Question
Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 25%. The T-bill rate is
Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 25%. The T-bill rate is 5%.a.(5 points) Your client chooses to invest $6,000 in your fund and $4,000 in a T-bill money market fund. What is the reward-to-variability ratio (S) of your clients overall portfolio?b.Suppose this client decides to invest in your risky portfolio a proportion (y) of his total investment budget ($10,000) so that his overall portfolio will have an expected rate of return of 15%. i.(5points) What is the proportion y? ii.(5points) What is the standard deviation of the rate of return onyour clients portfolio?Is standard deviation of the rate of return on your clients overall portfoliois higher or lower than standard deviation of the rate of return of risky portfolio? Why?
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