Assume that you manage a risky portfolio with an expected rate of return of 16% and a standard deviation of 45%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 29 % Stock B 38 Stock C 33 Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 14%. a. What is the proportion y? (Round your answer to 1 decimal places.)

80%

Explanation:

In order to calculate this, we use the portfolio expected rate of return (PERR) as follows:

PERR = Rf + (Rp - Rf)y …………………………………………….. (1)

Where;

PERR = Portfolio expected rate of return = 14%, 0.14

Rf = T-bill rate = 6%, or 0.06

Rp = Expected rate of return = 16%, 0.16

Substituting the values into equation (1), we have:

0.14 = 0.06 + (0.16 – 0.06)y

0.14 – 0.06 = 0.10y

y = 0.08/0.10 = 0.80, or 80%

Therefore, the proportion y is 80%  

yup the answer is

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.