Problem 6-17

Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 28%. The T-bill rate is 7%.

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

Stock A	33	%
Stock B	35	%
Stock C	32	%

Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 13%.

a.	What is the proportion y? (Round your answer to the nearest whole number. Omit the "%" sign in your response.)

Proportion y

%

b.	What are your clients investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal place. Omit the "%" sign in your response.)

	Investment Proportions
T-Bills		%
Stock A		%
Stock B		%
Stock C		%

c.	What is the standard deviation of the rate of return on your clients portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal place. Omit the "%" sign in your response.)

Standard deviation

%