Consider the following information about a risky portfolio that you manage and a risk-free asset:...
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Accounting
Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rP)=12%,P=22%,rf=4%. a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on overall or complete portfolio equal to 7%. What proportion should she invest in the risky portfolio, P, and what proportion in the riskfree asset? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the standard deviation of the rate of return on her portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse? First client Second client
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