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You are the wealth manager for a client. Your investment group has constructed an efficient portfolio with expected return of 13% and standard deviation of
You are the wealth manager for a client. Your investment group has constructed an efficient portfolio with expected return of 13% and standard deviation of 20%. You have a client who is close to retirement and is therefore risk averse. She wants a portfolio with a maximum standard deviation of 8%. The risk-free rate is 4%.
A) What portion of the portfolio should you put in the efficient portfolio, and what portion in riskless bonds to give your client the desired complete portfolio?
B) What is the expected return of that portfolio?
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