INVESTMENTS (LOOSELEAF) W/CONNECT
INVESTMENTS (LOOSELEAF) W/CONNECT
11th Edition
ISBN: 9781260465945
Author: Bodie
Publisher: MCG
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Chapter 6, Problem 8CP
Summary Introduction

To calculate: The expected return and its standard deviation based on the client’s portfolio.

Introduction:

Standard deviation on return: It is one of the measures which is applied to analyze the portfolio. It measures the actual amount from where the returns deviate from its mean.

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You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client’s portfolio?
You are managing a fund with an expected rate of return of 15% and a standard deviation of 27%. The T-bill rate is 3%. Your client chooses to invest 60% of his portfolio in your fund and the rest in a T-bill money market fund. What is the expected return of your client's portfolio? Enter your answer as a decimal number, rounded to three decimal places.
You manage an equity fund with an expected risk premium of 11.2% and a standard deviation of 26%. The rate on Treasury bills is 4.2%. Your client chooses to invest $70,000 of her portfolio in your equity fund and $30,000 in a T-bill money market fund. What are the expected return and standard deviation of your client’s portfolio? (Round your answers to 2 decimal places.)
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Chapter 8 Risk and Return; Author: Michael Nugent;https://www.youtube.com/watch?v=7n0ciQ54VAI;License: Standard Youtube License