Question
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
Homework Answers
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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