You manage a risky portfolio with an expected rate of return of 16% and a standard deviation of 27%. The T-bill rate is 7%.

Questions: a. Your client chooses to invest 80% of a portfolio in your fund and 20% in an essentially risk-free money market fund. What are the expected value and standard deviations of the rate of return on his portfolio? (3 points)

b. Suppose that your risky portfolio includes the following investments in the given proportions: Stock A 25% Stock B 30% Stock C 45% What are the investment proportions of your clients overall portfolio, including the position in T-bills? (2 points)

c. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? (2 points) Your clients? (2 points)