1) According to asset j's return forecast, calculate

2) Consider an optimal risky portfolio Q that combines asset j with the index portfolioM.Calculate the optimal weight in asset j.

3) Calculate the Sharpe ratio of portfolio and portfolio

4) Show .

sider a single-index model economy. The index portfolio M has E(RM)=8%,M=20%,rf=6%. An individual asset j has an estimate of j=1 and ej2=0.01 using the single index tel Rj=j+jRM+ej.Rj=rjrf,RM=rMrf. The forecast of asset j's return is E(rj)=13%. j M(SM) Q(SQ) SQ2=SM2+(ejj)2 sider a single-index model economy. The index portfolio M has E(RM)=8%,M=20%,rf=6%. An individual asset j has an estimate of j=1 and ej2=0.01 using the single index tel Rj=j+jRM+ej.Rj=rjrf,RM=rMrf. The forecast of asset j's return is E(rj)=13%. j M(SM) Q(SQ) SQ2=SM2+(ejj)2