Problem 5-13 (Algo)

Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 33%. The T-bill rate is 7%.

Your risky portfolio includes the following investments in the given proportions:

Stock A	30%
Stock B	35
Stock C	35

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 16%.

Required:

a. What is the proportion y? (Round your answer to 1 decimal place.)

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.)

c. What is the standard deviation of the rate of return on your client's portfolio? (Round your intermediate calculations and final answer to 1 decimal place.)