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