Suppose you manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 20%. The T-bill rate is 2%. Also, suppose your risky portfolio includes the following assets in the given proportions:

Stock A	10%
Stock B	40%
Stock C	20%
Stock D	30%

Suppose your client comes to you and asks you to help her create a portfolio with expected return of 20%.

1. What fraction (y) will she need to invest in your risky portfolio to obtain this expected return?

2. What are the investment proportions of the complete portfolio?

y_{T bill} =

yA=

yB =

yC =

yD =

3. Explain how you will allocate your assets based on the weights above ?

4. What is the standard deviation of the rate of return on your clients portfolio?

_{P =}

5. What is the Sharpe ratio of your clients portfolio?