Question

You manage a risky portfolio with an expected rate of return of 17% and a standard deviation
of 27%. The Treasury-bill rate is 7%. One of your clients chooses to invest 70% of a portfolio in
your fund and 30% in a T-bill money market fund. What is the expected value and standard
deviation of the rate of return on your client's portfolio?

Answer 1

Answer:

(a) The expected value and standard deviation:

{eq}E(R_p) = W_{rp}E(R_{rp}) + W_tR_t {/eq}

{eq}E(R_p) = (0.70)(0.17)+(0.30)(0.07) {/eq}

{eq}E(R_p) = 0.14 {/eq}

{eq}\sigma_p^2 = W_{rp}^2\sigma_{rp}^2 {/eq}

{eq}\sigma_p^2 = 0.70^2*0.27^2 {/eq}

{eq}\sigma_p = 0.1890 {/eq}

Explanation:

Answer 2

Hey Mate !

What is the expected value and standard  deviation of the rate of return on your client's portfolio?

The expected value and standard deviation:

E ( R p ) = W r p  E ( R r p ) + W t R t

 E ( R p ) = ( 0.70 ) ( 0.17 ) + ( 0.30 ) ( 0.07 )

E ( R p ) = 0.14

σp2=Wrp2σrp2

σp2=0.702∗0.272

σ p = 0.1890

Explanation:

Hope it Helps u !