What is the expected rate of return on the overall portfolio

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Reference no: EM132208229

Question - Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 28%. The T-bill rate is 4%.

Stock A - 20%

Stock B - 30%

Stock C - 50%

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?

b. What is the expected rate of return on the overall portfolio?

Reference no: EM132208229

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