Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 38%. The T-bill rate is 5%. Your client chooses to invest 85% of a portfolio in your fund and 15% 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 12.65 % per year Standard deviation 32.3 % per year
b. Suppose your risky portfolio includes the following investments in the given proportions: Stock A 22% Stock B 31% Stock C 47% 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 15 % Stock A 18.7 % Stock B 26.35 % Stock C 39.95 %
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