Question
Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 44%. 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 44%. The T-bill rate is 5%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund.
a. What is the expected return and standard deviation of your client's portfolio? (Round your answers to 2 decimal places.)
Expected return | % per year |
Standard deviation | % per year |
b. Suppose your risky portfolio includes the following investments in the given proportions:
Stock A | 28% |
Stock B | 37% |
Stock C | 35% |
What are the investment proportions of your clients overall portfolio, including the position in T-bills? (Round your answers to 2 decimal places.)
Security | Investment Proportions | |
T-Bills | % | |
Stock A | % | |
Stock B | % | |
Stock C | % | |
c. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? (Round your answers to 4 decimal places.)
Reward-to-Volatility Ratio | |
Risky portfolio | |
Clients overall portfolio | |
|
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