Ask Question
BusinessBusiness
2 August, 23:29

Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 39%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 23% Stock B 32% Stock C 45% Your client decides to invest in your risky portfolio with a proportion (y) of his investment budget with the rest in a T-bill (MMF) money market fund so that the overall portfolio will have an expected return of 9%. What is the proportion y

+4
Answers (1)
  1. 2 August, 23:58
    0
    y = 50 %

    Explanation:

    As per the data given in the question, computation are as follows:

    Expected return = y * expected rate of return for portfolio + (1 - y) * rate of T-bills

    By putting the value from the given data in the above formula, we get

    0.09 = y*0.12 + (1 - y) * 0.06

    0.09 = 0.12y + 0.06 - 0.06y

    0.03 = 0.06 y

    y = 0.50

    = 50%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 39%. The T-bill rate is 6%. ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
If a production possibility curve representing a tradeoff between a grade in English and a grade in math has a negative slope we know that: A. there is a direct relationship between grades in English and grades in math. B.
Answers (1)
Suppose a pizza parlor has the following production costs 4$ in labor per pizza, 3$ in ingredients per pizza,.40$ in electricity per pizza, 2000$ in restaurant rent per month, and $450 in insurance per month.
Answers (1)
Billingsley United declared a $0.20 a share dividend on Thursday, October 16. The dividend will be paid on Monday, November 10 to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date? A.
Answers (1)
Consider the following hypothetical transactions of the Balance of Payments of Country A: 1. Country A's firms export to Country B $100 worth of grain 2. Country A's firms import from Country C $500 worth of steel 3.
Answers (1)
Which of the following statements is not true: Multiple Choice Accounts receivable are increased by billings to customers. Accounts receivable are held by a seller. Accounts receivable arise from credit sales.
Answers (1)
New Questions in Business
On January 1, Kirk Corporation had total assets of $851,000. During the month, the following activities occurred: Kirk Corporation acquired equipment costing $6,100, promising to pay cash for it in 60 days.
Answers (1)
Antonio derives more utility from spending an additional dollar on boots than on gloves. We can assume that: a. the marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on gloves. b.
Answers (1)
Which profession is most likely to be concerned with the effect of supervisors management styles?
Answers (1)
The primary goals of inventory managers are to maintain a sufficient quantity of inventory to meet customers' needs, ensure inventory quality meets customers' expectations and company standards, and minimize the cost of acquiring and carrying an
Answers (1)
Stacy Hanes is an African-American woman who has recently taken her first job and does not seem to like the work environment at all, Her colleagues put down her ideas at team meetings and refer to them as "stupid.
Answers (1)
Home » Business » Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 39%. The T-bill rate is 6%.
Sign Up Forgot Password?