Question

You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. Suppose that your risky portfolio includes the following investments in the given proportions: Stock A 25 % Stock B 32 % Stock C 43 % What are the investment proportions of your client’s overall portfolio, including the position in T-bills?

Answer 1

Stock A: 20%

Stock B: 25.6%

Stock C: 34.4%

Step-by-step explanation:

Calculation for the investment proportions of your client's overall portfolio, including the position in T-bills

Based on the information given the T-bill rate is 8% which means we are going to multiply each stock Investments by 8%

Stock A 25%

Stock B 32%

Stock C 43%

Hence

Stock A: .25*.8= 20%

Stock B: .32*.8= 25.6%

Stock C: .43*.8= 34.4%

Therefore the investment proportions of your client's overall portfolio, including the position in T-bills will be :

Stock A: 20%

Stock B: 25.6%

Stock C: 34.4%