3. Your current portfolio has historical geometric return of 10% and historical standard deviation of 10%. There are 2 assets, A and B, you are considering buying. You could sell 5% of all the positions in your current portfolio and buy 5% of A, you could sell 5% of all the positions in your current portfolio and buy 5% of B, you could sell 10% of all positions in your current portfolio and buy 5% of A and 5% of B, or you could do nothing. As the portfolio manager of the current portfolio you are tasked with achieving the highest expected Sharpe Ratio. What is the highest expected Sharpe Ratio from the strategies above?

A geometric return = 7%

A standard deviation = 8%

Covariance of A and your current portfolio of 0.1

B geometric return = 15%

B standard deviation = 30%

Covariance of B and your current portfolio of -0.075

Covariance of A and B of 0.05