Assume that you manage a risky portfolio with an expected rate of return of .22 and a standard deviation of 0.25. The T-bill rate is 0.04. Your client chooses to invest 0.40 of a portfolio in your portfolio and the balance in T-bills.

a. What is the expected return and standard deviation of your client's portfolio?

1 marks

b. Suppose your portfolio includes the following investments in the given proportions: share X - 40%, share Y 30%, and the balance in share Z.

What are the investment proportions of each stock in your client's overall portfolio, including the position in T-bills?

2 marks

c. What is the Sharpe ratio (S) of your risky portfolio and your client's overall portfolio? Interpret the Sharpe ratios.