Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation for 27%. The T-bill rate is 7%.
Your risky portfolio includes the following investments in the given proportions:
Stock A 27%
Stock B 33%
Stock C 40%

Suppose a client decides to invest in your risky porfolio a proportion of (y) for his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate for return of 15%.

(a) What is the proportion y?
Proportion ____________

(b) what are your client's investment proportions in your three stocks and the T-bill fund?

Security
T-bills _____________ %
Stock A ______________%
Stock B _______________%
Stock C _______________%

(c) what is the standard deviation of the rate of return on your clients's portfolio?

Standard deviation _________________%

The stock of Business Adventures sells for $40 a share. Its likely divident payout and end-of-year price depend on the state of the economy by the end of the year as follows:

Divident stock price

Boom $2.00 $50
Normal economy 1.00 43
Recession .50 34

Required:
(a) Calculate the expected holding-period return and standard deviation for the holding return. All three scenarios are equally likely.

Expected return ______________%
Standard Deviation _____________%

(b)Calculate the expected return and standard deviation for a portfolio invested half in business adventures and half in Treasury bills. The return on bills is 4%.

Expected return __________%
Standard devation ____________%

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Hi, fafan!

If you post what you think the answers are and how you arrived at them, you'll be much more likely to have someone very knowledgeable come along who'll be able to help you concerning whether your answers are correct or not.

You do want to be able to come up with the correct answers on your own, don't you?

Thanks!