You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 36%. The T-bill rate is 6%. Your client's degree of risk aversion is A = 3.1, assuming a utility function u = E(r) - A02. a. What proportion, y, of the total investment should be invested in your fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment proportion y b. What are the expected value and standard deviation of the rate of return on your client's optimized portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 36%. The T-bill rate is 6%. Your client's
degree of risk aversion is A = 3.1, assuming a utility function u =
E(r)
A02.
a. What proportion, y, of the total investment should be invested in your fund? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Investment proportion y
%
b. What are the expected value and standard deviation of the rate of return on your client's optimized portfolio? (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Expected return
%
Standard deviation
%
Transcribed Image Text:You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 36%. The T-bill rate is 6%. Your client's degree of risk aversion is A = 3.1, assuming a utility function u = E(r) A02. a. What proportion, y, of the total investment should be invested in your fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment proportion y % b. What are the expected value and standard deviation of the rate of return on your client's optimized portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return % Standard deviation %
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