BAO3403 Investment and Portfolio Management, Semester 1, B3, 2021 Question 1 (5 points) 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. 2 marks Formulae Return of complete portfolio - W, "Return of risky asset+W2*Return of risk free asset Risk of complete portfolioW, *Risk of risky asset Sharpe Ratio E(rp) -r's SP