You put 70% of your money in a stock portfolio that has an expected return of...

You put 70% of your money in a stock portfolio that has an expected return of 14.75% and a standard deviation of 28%. You put the rest of you money in a risky bond portfolio that has an expected return of 4.25% and a standard deviation of 15%. The stock and bond portfolio have a correlation 0.35.

a. Assume the risk–free rate is 2.00%. What is the stock weight in the tangency portfolio formed by creating the optimal risky portfolio from this stock and bond portfolio?

b. Using the information from a, what is the Sharpe ratio of the tangency portfolio formed by creating the optimal risky portfolio from this stock and bond portfolio?

Enter your answers rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

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jeff jeffy answered 1 year ago

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