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7) You have 100% of your money invested in a portfolio of 10 equally weighted securities. The portfolio has an expected return of 25% and

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7) You have 100% of your money invested in a portfolio of 10 equally weighted securities. The portfolio has an expected return of 25% and a standard deviation of returns of 50% You are thinking about investing in a new security. The new security has an expected return of 20%, a standard deviation of returns of 100%, and a correlation with your old portfolio return of 99%. Assume that the Sharpe Ratio is a legitimae measure of portfolio desirability. (For this problem, assume Sharpe Ratio is calculated as expected return divided by the standard deviation of returns Should you sell 100% of your current holdings to buy the new security? Should you sell one-third of your current portfolio, and use the proceeds to add the new security to your existing portfolio? Why

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