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Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 37%. The T-bill rate

 

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 37%. The T-bill rate is 5%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 21% 30 49 Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 14%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y % b. What are your client's investment proportions in your three stocks and in T-bills? (Round your intermediate calculations and final answers to 2 decimal places.) Security T-Bills Stock A Staal D Investment Proportions % % 01

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a 015y1y005014 Solving for y 015y005005y014 010y009 y010009 y09 b TBill 10090 10 ... blur-text-image

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