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1. Compute the Sharpe ratios of the SB fund and gold. Based only on these ratios, how desirable does investment in the SB fund by

1. Compute the Sharpe ratios of the SB fund and gold. Based only on these ratios, how desirable does investment in the SB fund by itself compared to investment in Gold by itself?

2. What new portfolio consisting of the SB fund along with gold would maximize the Sharpe ratio?

3. What portfolio would minimize risk (volatility) for a target return of 11%?

Asset SB fund Gold Correlation of gold with SB fund Risk-free rate Expected return 13.2% 4.5% -0.20 2% Volatility 16% 25%

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