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You manage a risky fund with expected return 17% and standard deviation 27%. The T-bill rate is 7%. You are working with a tough client.
You manage a risky fund with expected return 17% and standard deviation 27%. The T-bill rate is 7%. You are working with a tough client.
Suppose the same client in the previous question wants to rebalance his portfolio between your fund and T-bill, in order to have an expected portfolio return of 15%.
a) What is the percentage of his portfolio to invest in your fund?
b) What is the standard deviation of this new portfolio?
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