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Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 29%. The T-bill rate is 5%.

Stock A 22 %

Stock B 31 %

Stock C 47 %

A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 20%.

a. What is the investment proportion, y? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Investment proportion y %

b. What is the expected rate of return on the overall portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Rate of return %

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92863082

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