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Ber [7]
2 years ago
5

Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 30%. The T-bill rate

is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 24 % Stock B 32 Stock C 44 Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 13%. a. What is the proportion y? (Round your answer to 1 decimal places.) b. What are your client's investment proportions in your three stocks and in T-bills? (Round your intermediate calculations and final answers to 2 decimal places.) c. What is the standard deviation of the rate of return on your client's portfolio?
Business
1 answer:
Leviafan [203]2 years ago
3 0

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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The following data values represent the daily amount spent by a family during a summer vacation. find the sample standard deviat
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The sample standard deviation of this dataset is =19.1.

The Standard deviation is a degree of the amount of variant or dispersion of a set of values. A low widespread deviation indicates that the values tend to be near the mean of the set, at the same time as a high widespread deviation indicates that the values are spread out over a much wider variety.

x x- \bar x=x-101 (x-ˉx)2

96     -5                          25

125     24                        576

80     -21                     441

110     9                          81

75    -26                   676

100      -1                         1

121        20                    400

∑x=707 ∑(x-\bar x)=0 ∑(x-\bar x)2=2200

Mean \bar x =∑x/n

=96+125+80+110+75+100+121/7

=707/7

=101

Sample  standard deviation S=√∑(x-\bar x)2/n-1

=√2200/6

=√366.6667

=19.1

Learn more about standard deviation here:-brainly.com/question/475676

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4 0
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Conversion           1                    0.55                      0.60

P V in US$        (1,500,000)     482,460              923,361

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