1. Suppose you have a plan to invest in a risk-free asset and a portfolio of risky assets. The risk-free rate is 0.075. First, you want to select one portfolio from 5 different portfolios of risky assets, each portfolio of risky assets contains mortgage-backed securities (MBS) and equities. Following table shows each portfolios correlation between returns of MBS and equities.

b) With the goal of maximizing Sharpe ratio, complete the following table - c) In both tables above, which portfolio does provide the highest Sharpe ratio? Explain why. (5 points) d) Choose the portfolio with highest Sharpe ratio from second table as your desired portfolio of risky assets. Using that portfolio's expected returns and standard deviation, and using risk-free rates as 0.075, complete the following table showing portfolio return. (5 points) 1. Suppose you have a plan to invest in a risk-free asset and a portfolio of risky assets. The riskfree rate is 0.075. First, you want to select one portfolio from 5 different portfolios of risky assets, each portfolio of risky assets contains mortgage-backed securities (MBS) and equities. Following table shows each portfolio's correlation between returns of MBS and equities. [ Returns characteristics of MBS and equities are as follows - a) With the goal of minimizing risk, complete the following table - (s points) b) With the goal of maximizing Sharpe ratio, complete the following table - c) In both tables above, which portfolio does provide the highest Sharpe ratio? Explain why. (5 points) d) Choose the portfolio with highest Sharpe ratio from second table as your desired portfolio of risky assets. Using that portfolio's expected returns and standard deviation, and using risk-free rates as 0.075, complete the following table showing portfolio return. (5 points) 1. Suppose you have a plan to invest in a risk-free asset and a portfolio of risky assets. The riskfree rate is 0.075. First, you want to select one portfolio from 5 different portfolios of risky assets, each portfolio of risky assets contains mortgage-backed securities (MBS) and equities. Following table shows each portfolio's correlation between returns of MBS and equities. [ Returns characteristics of MBS and equities are as follows - a) With the goal of minimizing risk, complete the following table - (s points)