# Securities Analysis: Risky Portfolio

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?

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#### 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.