You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 36%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 278 Stock B 35% Stock C 38% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 15%. a. What is the proportion y? (Round your answer to the nearest whole number.) Proportion y % b. What are your client's investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Investment Proportions T-Bills % Stock A % Stock B Stock C % c. What is the standard deviation of the rate of return on your client's portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation %

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 18% and a standard deviation of 36%. The T-bill rate is 6%.
Your risky portfolio includes the following investments in the given proportions:
Stock A
27%
Stock B
35%
Stock C
38%
Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio
will have an expected rate of return of 15%.
a. What is the proportion y? (Round your answer to the nearest whole number.)
Proportion y
%
b. What are your client's investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations.
Round your answers to 2 decimal places.)
Investment
Proportions
T-Bills
%
Stock A
%
Stock B
%
Stock C
%
c. What is the standard deviation of the rate of return on your client's portfolio? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Standard deviation
%
Transcribed Image Text:You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 36%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 27% Stock B 35% Stock C 38% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 15%. a. What is the proportion y? (Round your answer to the nearest whole number.) Proportion y % b. What are your client's investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Investment Proportions T-Bills % Stock A % Stock B % Stock C % c. What is the standard deviation of the rate of return on your client's portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation %
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