Assume that you manage a risky portfolio with an expected rate of return of 14% and astandard deviation of 30%. The T-bill rate is 6%.Your client decides to invest in your risky portfolio a proportion (y) of his total investmentbudget with the remainder in a T-bill money market fund so that his overall portfolio willhave an expected rate of return of 13%a. What is the proportion y? (Enter your answer as a decimal number rounded to 2decimal places.)Proportion yb. What is the standard deviation of the rate of return on your client's portfolio? (Enteryour answer as a percentage rounded to two decimal places.)Standard% per yeardeviation

a.Calculation of Proportion y:The Proportion y is 87.50%.

Answered: Assume that you manage a risky…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

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