Question
Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 40%. 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 40%. The T-bill rate is 5%. |
| Stock A | 24 | % |
| Stock B | 33 | % |
| Stock C | 43 | % |
| 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 30%. |
| a. | What is the investment proportion, y? |
| Investment proportion y | % |
| b. | What is the expected rate of return on the overall portfolio? |
| Rate of return | % |
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Mathematical Finance Core Theory Problems And Statistical Algorithms
Authors: Nikolai Dokuchaev
1st Edition
0415414482, 978-0415414487
