Question
1. Consider the following three stocks: A, B and C. Their expected returns, correlations and standard deviations are given below. A B C E[R] 7%
1. Consider the following three stocks: A, B and C. Their expected returns, correlations and standard deviations are given below.
|
| A | B | C |
| E[R] | 7% | 5% | 10% |
| St. Dev. | 15% | 20% | 17% |
| Correlation Matrix | A | B | C |
| A | 1 | 0.2 | 0.6 |
| B | 0.2 | 1 | 0.1 |
| C | 0.6 | 0.1 | 1 |
Considering that the risk-free rate is 2%, please describe the stock allocations in the tangency portfolio. What is the Sharpe Ratio of the tangency portfolio (6 points)?
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The Moorad Choudhry Anthology Website Past Present And Future Principles Of Banking And Finance
Authors: Moorad Choudhry
1st Edition
1118779738, 978-1118779736
