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You manage a risky portfolio with an expected rate of return of 1 2 % and a standard deviation of 8 % . The T
You manage a risky portfolio with an expected rate of return of and a standard
deviation of The Tbill rate is Suppose that your client prefers to invest
in your fund a proportion of his wealth that minimizes the overall portfolio standard
deviation subject to the constraint that the overall portfolio's mean be at least
What is the proportion?
What is the standard deviation of the resulting portfolio?
What is its rewardtovariability ratio?
What is your client's risk aversion? Hint: Slide
What is the maximum level of risk aversion for which your original risky portfolio
is still preferred to Tbills?
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