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Asset Expected return Standard deviation DullCo equity 0.06 0.094 ExcitingCo equity 0.19 0.24 Riskless debt 0.02 NA The covariance between the returns on SafeCo equity
Asset | Expected return | Standard deviation |
DullCo equity | 0.06 | 0.094 |
ExcitingCo equity | 0.19 | 0.24 |
Riskless debt | 0.02 | NA |
The covariance between the returns on SafeCo equity and DangerCo equity is 8.865
- 15 points: What fraction of the optimal risky portfolio is composed of SafeCo stock?
- 5 points: What percentage of her money should Alice put in the risky portfolio if her coefficient of risk aversion is 2.6?
- 5 points: What percentage of her money should Bob put in the risky portfolio if his coefficient of risk aversion is 3.4?
- 5 points: What is the difference between the Sharpe Ratios of Alices complete portfolio and Bobs complete portfolio?
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