Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 39%. The T-bill rate is 6%.
Your risky portfolio includes the following investments in the given proportions:
Stock A 23%
Stock B 32%
Stock C 45%
Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 9%.
a. What is the proportion y? (Round your answer to 2 decimal places.)
Proportion y ______
b. What are your client's investment proportions in your three stocks and the T-bill fund? (Round your intermediate calculations and final answers to 2 decimal places.)
Security Investment Proportions
T-Bills ____%
Stock A ____%
Stock B ____%
Stock C ____%
c. What is the standard deviation of the rate of return on your client's portfolio? (Round your intermediate calculations and final answer to 2 decimal places.)
Standard deviation ____ % per year