296 19% 0% 6.096 an 6.5% 0.5% 10.0% 10.5% 11.0% a) 12.0% 11.5% d. Suppose there is a risk free asset available at 3%. The weights of A and B that would yield a market portfolio, M with the highest Sharpe ratio are 0.2951 and 0.7049 respectively. What are the expected return, E(Rm), standard deviation, Om, Sharpe ratio, SRM, and utility level, Um, of this market portfolio, M? (8 marks) Hints: [E(R)-R, lo-LE(R.)-R lO. [ER.)-R, 10, +[ER,)-R,]o -[E(R)-R+ER,)-R10 [0.09 -0.03] 0.000476-(0.028 -0.031 +0.000132 = 0.2951 [0.09 -0.03] 0.000476+[0.028 -0.03] 0.008650-10.09 -0.03 +0.028-0.03] -0.000132 0,1-0 1-0.29510.7049 FIN4006-212251 2 of 5 296 19% 0% 6.096 an 6.5% 0.5% 10.0% 10.5% 11.0% a) 12.0% 11.5% d. Suppose there is a risk free asset available at 3%. The weights of A and B that would yield a market portfolio, M with the highest Sharpe ratio are 0.2951 and 0.7049 respectively. What are the expected return, E(Rm), standard deviation, Om, Sharpe ratio, SRM, and utility level, Um, of this market portfolio, M? (8 marks) Hints: [E(R)-R, lo-LE(R.)-R lO. [ER.)-R, 10, +[ER,)-R,]o -[E(R)-R+ER,)-R10 [0.09 -0.03] 0.000476-(0.028 -0.031 +0.000132 = 0.2951 [0.09 -0.03] 0.000476+[0.028 -0.03] 0.008650-10.09 -0.03 +0.028-0.03] -0.000132 0,1-0 1-0.29510.7049 FIN4006-212251 2 of 5