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You manage a risky portfolio with expected rate of return of 12% and a standard deviation of 24%. The T-bill rate is 3%. Return to

You manage a risky portfolio with expected rate of return of 12% and a standard deviation of 24%. The T-bill rate is 3%.

  1. Return to the original example (40% in your fund and 60% in T-bill). Your clients degree of risk aversion is A = 8.0.
  1. What proportion, y, of the total investment should be invested in your risky fund?
  2. What is the expected value and standard deviation of the rate of return on your clients optimized portfolio?

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