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You invest in a risky asset that is expected to pay 12% with a standard deviation...

You invest in a risky asset that is expected to pay 12% with a standard deviation of 22% and a T-bill paying 3%. What is the expected Sharpe ratio of your portfolio if you choose to invest 60% of your funds into the risky asset? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Portfolio Sharpe Ratio     

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Answer #1

E(R) = 0.60 * 0.12 + 0.40 * 0.03

E(R) = 0.084

E(R) = 8.40%

Portfolio standard deviation = 0.60 * 0.22 + 0.40 * 0

T-bill has a standard deviation of 0

Portfolio standard deviation = 0.132

Portfolio standard deviation = 13.2%

rf = 0.03

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