Question: Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 33%. The T-bill rate is 6%. Your client chooses to invest 75% of a portfolio in your fund and 25% 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 % per year

Standard deviation % per year

b. Suppose your risky portfolio includes the following investments in the given proportions:

Stock A 30%

Stock B 35%

Stock C 35%

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 %

Stock A %

Stock B %

Stock C %

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