(a) What are the expected return and standard deviation of the return on your clients portfolio?

(b) You are told that the optimal efficient portfolio (P) formed with WMT and IBM has weights wWMT = 60% and wIBM = 40%.

i. What are the expected return and standard deviation of Portfolio P?

ii. What is its Sharpe ratio? How does it compare with the Sharpe ratio of your clients current portfolio? Explain your finding.

Problem 2. Consider two stocks: WMT and IBM with the following properties Stock E(r) B(r) WMT 8% 13% IBM 12% 20% The correlation of the two stock returns is PWMT,IBM = 9% and the risk-free rate is rj = 1%. You are advising a client who has $1 million invested. Currently 50% of this money is in WMT and 50% is in IBM