Explore BrainMass
Share

Explore BrainMass

    Securities Analysis: Risky Portfolio

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    For this problem, assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%.

    a. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. What is the expected retrun and standard deviation of your client's portfolio?

    b. Suppose your risky portfolio includes the following investments in the given proportions:
    stock a 27%
    stock b 33%
    stock c 40%

    What are the investment proportions of your client's overall portfolio, including the position in T-bills?

    c. What is the reward-to-variability ratio of your risky portfolio and your client's overall portfolio?

    © BrainMass Inc. brainmass.com October 9, 2019, 7:48 pm ad1c9bdddf
    https://brainmass.com/business/valuing-securities/securities-analysis-risky-portfolio-130016

    Attachments

    Solution Preview

    Please see the attached file.

    . For this problem, assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%.
    a. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. What is the expected retrun and standard deviation of your client's portfolio?
    Solution:
    Return of a portfolio is given by

    Rp =
    Where Ri is ...

    Solution Summary

    This solution explains a security analysis for a risky portfolio.

    $2.19