Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 33%. The T-bill rate is 6%. Your client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund.
a. What is the expected return and standard deviation of your client's portfolio? (Round your answers to 2 decimal places.)
Expected return % per year
Standard deviation % per year
b. Suppose your risky portfolio includes the following investments in the given proportions:
Stock A 30%
Stock B 35%
Stock C 35%
What are the investment proportions of your client’s overall portfolio, including the position in T-bills? (Round your answers to 2 decimal places.)
Security Investment Proportions
T-Bills %
Stock A %
Stock B %
Stock C %
c. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? (Round your answers to 4 decimal places.)
Reward-to-Volatility Ratio
Risky portfolio
Client’s overall portfolio