, assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%.Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund.What is the expected return and standard deviation of your client’s portfolio?Suppose your risky portfolio includes the following investments in the given proportions: Stock A 27% Stock B 33 Stock C 40What are the investment proportions of each stock in your client’s overall portfolio, including the position in T-bills?What is the Sharpe ratio (S) of your risky portfolio and your client’s overall portfolio?Draw the CAL of your portfolio on an expected return/standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund’s CAL.

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 12P

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, assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%.

Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund.
What is the expected return and standard deviation of your client’s portfolio?
Suppose your risky portfolio includes the following investments in the given proportions:

Stock A 27%

Stock B 33

Stock C 40

What are the investment proportions of each stock in your client’s overall portfolio, including the position in T-bills?

What is the Sharpe ratio (S) of your risky portfolio and your client’s overall portfolio?
Draw the CAL of your portfolio on an expected return/standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund’s CAL.

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