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%.
A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 20%.
a. What is the investment proportion, y? (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.)
Investment proportion y %
b. What is the expected rate of return on your client's overall portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.)
Rate of return