Question
1. Refer to the Optimization worksheet. This worksheet contains the annual returns of three risky assets (A, B, and C) and the risk-free asset. Each
1. Refer to the Optimization worksheet.
This worksheet contains the annual returns of three risky assets (A, B, and C) and the risk-free asset. Each row represents returns in a particular year. Based on this data, perform the following tasks.
Asset A | Asset B | Asset C | Portfolio | Risk-free asset |
3.24% | 16.81% | 43.68% | 1.18% | |
-9.07% | 21.20% | 37.14% | 1.10% | |
0.91% | 23.77% | -7.95% | 1.24% | |
-1.87% | 25.24% | 29.46% | 1.58% | |
1.36% | 28.97% | 14.41% | 2.04% | |
-6.61% | 2.34% | 13.96% | 1.33% | |
-7.40% | 31.53% | 21.74% | 1.49% | |
6.25% | 4.98% | 21.40% | 1.35% | |
-1.75% | -2.90% | 24.96% | 1.07% | |
4.15% | 12.08% | 32.56% | 1.69% | |
-10.84% | 23.42% | 19.58% | 1.90% | |
0.97% | 12.51% | 12.66% | 2.04% | |
-12.40% | 24.16% | -9.64% | 1.74% | |
-8.49% | 24.23% | 30.22% | 1.36% | |
-5.51% | 7.48% | 8.61% | 1.95% | |
-5.15% | 29.94% | 47.78% | 1.48% | |
-8.92% | 3.42% | 32.80% | 1.30% | |
-14.77% | 10.20% | 48.95% | 2.01% | |
-8.65% | 0.68% | 3.51% | 1.17% | |
-0.83% | 2.40% | 1.11% | 1.29% | |
1.79% | 15.94% | -9.14% | 2.03% | |
8.19% | 3.70% | -2.85% | 1.11% | |
-8.13% | 27.61% | -9.99% | 1.69% | |
17.75% | 15.50% | 39.28% | 1.32% | |
-4.13% | 3.28% | 10.73% | 1.14% | |
-4.49% | 12.46% | 30.35% | 1.19% | |
-10.06% | 3.34% | 8.74% | 1.84% | |
6.61% | 16.51% | 39.35% | 1.57% | |
-11.32% | 30.07% | -1.63% | 1.85% | |
5.21% | 18.61% | 7.99% | 1.72% | |
-6.03% | 1.08% | 43.86% | 1.65% | |
-9.59% | 7.10% | 20.57% | 1.71% | |
-0.84% | -1.99% | 27.96% | 1.17% | |
-4.70% | -0.10% | -26.30% | 1.58% | |
6.04% | 7.78% | 31.81% | 1.81% | |
-1.08% | 16.67% | 18.17% | 1.22% | |
-11.20% | 11.41% | 37.56% | 1.07% | |
5.41% | 24.52% | 39.88% | 1.86% | |
-0.84% | 17.01% | -5.47% | 1.14% | |
-4.04% | 1.60% | 9.50% | 1.54% | |
-10.79% | -1.51% | 2.59% | 1.16% | |
10.47% | 16.64% | 30.67% | 1.72% | |
-1.72% | 24.25% | 35.04% | 1.25% | |
-9.81% | 8.09% | -0.48% | 1.97% | |
13.31% | 1.58% | -6.83% | 1.24% | |
-5.73% | 0.77% | 32.45% | 1.08% | |
-9.66% | 24.14% | 4.23% | 1.54% | |
-14.62% | 6.13% | 19.00% | 1.35% | |
-7.05% | 12.76% | 10.08% | 1.40% | |
12.59% | 27.29% | 36.15% | 1.58% |
Construct a portfolio with the following weights: 50% Asset A; 25% Asset B; 25% Asset C. For this portfolio, compute the:
(a) mean portfolio returns, (b) standard deviation of portfolio returns, and
(c) Sharpe ratio of the portfolio. For part (d) You are subject to these conditions:
short-selling is allowed, and the portfolio weight on Asset A cannot exceed 50%. the portfolio weight on Asset B cannot exceed 25%.
(d) Find the portfolio weights on the risky assets that maximize the Sharpe ratio of the portfolio.
For part (e), you are subject to these conditions: short-selling is allowed, and
the portfolio weight on Asset C cannot exceed 10%.
(e) Find the portfolio weights on the risky assets that minimize the portfolio standard deviation.
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