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%.

1. 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.

2. 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%

3. What are the investment proportions of Johns overall portfolio, including the position in T-note cash fund? (2 marks)
4. What is the reward-to-volatility ratio of Johns overall portfolio? (2 marks)