As the T bill has no risk, so the entire standard deviation will come from the risky asset. So the proportion invested in the risky asset = y
y x 38 = 17
y = 0.45 or 45%
This implies that 1- y is invested in the T bills so 1-y = 55%
Portfolio return = y x return of risky asset + (1-y) x return on Tbill
Portfolio return = 0.45 x 17+ (1-0.45) x 6
Portfolio return = y x return of risky asset + (1-y) x return on Tbill
Portfolio return = 0.45 x 17+ (1-0.45) x 6
Portfolio return = 10.95%
Problem 6-18 You manage a risky portfolio with an expected rate of return of 17% and...
You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 29%. The T-bill rate is 5%. 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 18%. a. What is the investment proportion, y? (Round your answer to 2 decimal places.) Investment proportion y b. What is...
You manage a risky portfolio with an expected rate of return of 17%and a standard deviation of 28%. The T-bill rate is 7%.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 17%.a. What is the investment proportion, y ? (Round your answer to 2 decimal places.)b. What is the expected rate of return on...
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