Assume that you manage a risky fund with an expected rate of return of 15% and a standard deviation of 24%. The T-bill rate is 5%.
A. Your client Amy chooses to invest 80% of a portfolio in your risky fund and the rest in a T-bill money market fund. Suppose your risky fund includes 50% stocks and 50% long term bonds, what are the investment proportions of Amy’s overall portfolio in stocks, long term bonds, and T-bills respectively?