Alt Fn You will be meeting with a client that is looking for investment advice from you based on the two strategies A & B. In preparation for your upcoming meeting with the client, your boss asks that you respond to the questions below and be ready to discuss. Hint: You will need to determine the correlations and volatilities for each risk premium. Analytical Assignment The analytical portion of the case assignment should be completed in the excel template which can be found in Canvas. Plot in Excel the risky asset opportunity set for Portfolios A & B. To do this you will need to create the following table in Excel assuming weights of portfolio A & B in 10 percentage point increments. Then calculate expected return; standard deviation; and Sharpe ratio for each allocation to A & B. Your table in the Excel file should look like the one below. 1. Weight Port A Weight Port B Return Standard Sharpe Ratio Deviation 100% 0% 10 20 30 40 50 60 70 80 90 100 80 70 60 50 40 30 20 10 Determine the optimal allocation of A & B and draw in the Capital Allocation Line (CAL). The approximate optimal allocation can be determined using a table like the one shown above. Or you can obtain a more precise optimal allocation using the formula shown in Chapter 7 (equation 7.13). Some students have used Excel's Solver function to find the optimal risky portfolio - that is also acceptable. When drawing the CAL on the efficient frontier graph plotted in Excel, you can manually draw a line starting at the risk free rate to the tangent point. 2 Find the optimal complete portfolio based on your client's indifference curve. Alt Fn You will be meeting with a client that is looking for investment advice from you based on the two strategies A & B. In preparation for your upcoming meeting with the client, your boss asks that you respond to the questions below and be ready to discuss. Hint: You will need to determine the correlations and volatilities for each risk premium. Analytical Assignment The analytical portion of the case assignment should be completed in the excel template which can be found in Canvas. Plot in Excel the risky asset opportunity set for Portfolios A & B. To do this you will need to create the following table in Excel assuming weights of portfolio A & B in 10 percentage point increments. Then calculate expected return; standard deviation; and Sharpe ratio for each allocation to A & B. Your table in the Excel file should look like the one below. 1. Weight Port A Weight Port B Return Standard Sharpe Ratio Deviation 100% 0% 10 20 30 40 50 60 70 80 90 100 80 70 60 50 40 30 20 10 Determine the optimal allocation of A & B and draw in the Capital Allocation Line (CAL). The approximate optimal allocation can be determined using a table like the one shown above. Or you can obtain a more precise optimal allocation using the formula shown in Chapter 7 (equation 7.13). Some students have used Excel's Solver function to find the optimal risky portfolio - that is also acceptable. When drawing the CAL on the efficient frontier graph plotted in Excel, you can manually draw a line starting at the risk free rate to the tangent point. 2 Find the optimal complete portfolio based on your client's indifference curve
