I need more information for this question
Answer:
a. 87.5%
b. Stock A: 21%; Stock B: 28%; Stock C: 38.5%; T-bill: 12.5%
c. Standard deviation of the client's portfolio: 26.25%
Explanation:
a. y is calculated as:
Risky portfolio return * y + T-bill return * (1 - y) = Expected return of the portfolio <=> 0.14y + 0.06 ( 1-y) = 0.13 <=> y = 87.5%
b. Client investment in each stock and in T-bills:
Client investment in each stock = 0.875 * percentage of each stock in a risky portfolio ( because the risky portfolio is accounted for 87.5% of the whole investment)
=> Stock A = 24% x 0.875 = 21% ; Stock B = 32% * 0.875 = 28% ; Stock C = 44 * 0.875 = 38.5%
Client investment in T-bill = 1- y = 1 - 0.875 = 12.5%
c. Standard deviation is calculated as: Standard deviation of risky portfolio * y = 30% * 87.5% = 26.25% (because standard deviation of return in T-bill is 0)
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Although the grapevine supplements what formal communication does not provide sometimes, and creates a sense of unity among employees, they should be wary due it carries partial information and it's more based on rumors; so it's not always trustworthy, especially when it comes to business, because important decisions depend on reliable sources to ensure favorable outcomes.
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