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You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 32%. The T-bill rate is 3%.

You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 32%. The T-bill rate is 3%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%. Required: a. What is the investment proportion; y? b. What is the expected rate of return on the complete portfolio?

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