You invest $100 in a risky asset with an expected rate of return of 0.13 and...

You invest $100 in a risky asset with an expected rate of return of 0.13 and a standard deviation of 0.11 and a T-bill with a rate of return of 0.03.

The slope of the capital allocation line formed with the risky asset and the risk-free asset is equal to

Solutions

Expert Solution

Slope of CAL is Sharpe Ratio.

So, Sharpe Ratio = [E(rS) - rF] / S

= [0.13 - 0.03] / 0.11

= 0.10 / 0.11 = 0.91

jeff jeffy answered 1 year ago

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