Question

You are constructing a portfolio of two assets, asset X and asset Y. The expected returns...

You are constructing a portfolio of two assets, asset X and asset Y. The expected
returns of the assets are 7 percent and 20 percent, respectively. The standard
deviations of the assets are 15 percent and 40 percent, respectively. The
correlation between the two assets is .30 and the risk-free rate is 2 percent.
Required:
a) What is the optimal Sharpe ratio in a portfolio of the two assets?
b) What is the smallest expected loss for this portfolio over the coming year
with a probability of 5.0 percent?

Math   Statistics-And-Probability   
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