Question
In: Finance
You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury...
You are considering investing $1,000 in a complete portfolio.
The complete portfolio is composed of Treasury bills that pay 2%
and a risky portfolio, P, constructed with two risky securities, X
and Y. The optimal weights of X and Y in P are 40% and 60%,
respectively. X has an expected rate of return of 0.10 and variance
of 0.0081, and Y has an expected rate of return of 0.06 and a
variance of 0.0036. The coefficient of correlation, rho, between X
and Y is 0.45. If you decide to hold a complete portfolio that has
a standard deviation of expected returns, i.e., the risk or sigma,
of 10%
What is the SR for the risky portfolio P
Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 1 year agoRelated Solutions
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