You have $800,000 invested in a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets.
E(rp)=12.00%
σp =7.00%
T-Bill rate=3.6%
Proportion of T-Bill in the complete portfolio: 20%
Proportion of risky portfolio P in the complete portfolio: 80%
Composition of P:
Stock A 40%
Stock B 25%
Stock C 35%
Total 100%
1) What is the expected return on your complete portfolio?
2) What is the standard deviation of your complete portfolio?
3) What are the dollar amounts of Stocks A, B, and C, respectively, in your complete portfolio?
4) If your degree of risk aversion is A=4, is your complete portfolio optimal? (assuming P is the optimal risky portfolio)