In: Finance
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows:
Expected Return | Standard Deviation | ||||||
Stock fund (S) | 20 | % | 35 | % | |||
Bond fund (B) | 11 | 15 | |||||
The correlation between the fund returns is 0.09.
What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.)