1) You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the S&P 500 stock index (passive portfolio), yields an expected rate of return of 13% with a standard deviation of 25%. You manage an active portfolio with expected return 18% and standard deviation 28%. The risk-free rate is 8%.
Your client ponders whether to switch the 70% that is invested in your fund to the passive portfolio and keep the 30% in the risk-free asset. What is the expected rate of return of the complete portfolio (70% in risky portfolio and 30% in risk free portfolio) after the switch?
Please round your answer to the fourth decimal: 0.0000
2) You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the S&P 500 stock index (passive portfolio), yields an expected rate of return of 13% with a standard deviation of 25%. You manage an active portfolio with expected return 18% and standard deviation 28%. The risk-free rate is 8%.
Your client ponders whether to switch the 70% that is invested in your fund to the passive portfolio and keep the 30% in the risk-free asset. What is the standard deviation of the complete portfolio (70% in risky portfolio and 30% in risk-free portfolio) after the switch?
Please round your answer to the fourth decimal: 0.0000