Question 6

5 Points

You manage a RISKY portfolio with an expected rate of return of	18.00%
It has a standard deviation of		28.00%
The risk free rate of return is		8.00%
Suppose your client wants to invest in your risky fund, a proportion [y]
Your client want to maximize the expected return on the Entire Portfolio (risky + risk-free)
There is also a constraint that the Entire Portfolio has a standard devaition not greater than	18.0%

What is the expected rate of return on the Entire Portfolio [E(rc)]?

The model for the E(rc) = (1-y)*rf + (y)*Return on Risky Assets

16.54%

15.43%

14.43%

13.43%