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Tim runs a management fund. He oversees a risky portfolio with a standard deviation of 20%. This portfolio has an expected return of 12%. The
Tim runs a management fund. He oversees a risky portfolio with a standard deviation of 20%. This portfolio has an expected return of 12%. The current T-note rate is 5%.
- What is the reward-to-volatility ratio (S) of Tims risky portfolio? (2 marks)
John chooses to invest 45% of his portfolio in Tims fund and remaining in a T-Note cash fund.
- What is the expected return and standard deviation of your Johns portfolio? (4 marks)
Suppose Tims risky portfolio includes the following investments in the given proportions:
Share J 25%
Share K 35%
Share L 40%
- What are the investment proportions of Johns overall portfolio, including the position in T-note cash fund? (2 marks)
- What is the reward-to-volatility ratio of Johns overall portfolio? (2 marks)
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