Question

Calculate the Sharpe ratio of each of the three portfolios in Problem 40 (the initial portfolio...

Calculate the Sharpe ratio of each of the three portfolios in Problem 40 (the initial portfolio with 0% invested in Hannah, the second portfolio with 40% invested in Hannah, and the third portfolio with 15% invested in Hannah). What portfolio weight in Hannah stock maximizes the Sharpe ratio?

Problem#40

You are currently only invested in the Natasha Fund (aside from risk-free securities). It has an expected return of 14% with a volatility of 20%. Currently, the risk-free rate of interest is 3.8%. Your broker suggests that you add Hannah Corporation to your portfolio. Hannah Corporation has an expected return of 20%, a volatility of 60%, and a correlation of 0 with the Natasha Fund.

**please show the complete work out/steps with formulas. No excel sheets.**

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