Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume you have a $200,000 portfolio and you invest $75,000 in stock X and the remainder in stock Y. If the risk-free rate of return

Assume you have a $200,000 portfolio and you invest $75,000 in stock X and the remainder in stock Y. If the risk-free rate of return is 3.50%, and we assume that the standard deviation of the excess returns on the portfolio is 18%, what is the Sharpe Ratio for this portfolio formed from stocks X and Y?  Enter your answer rounded to two decimal places. For example, if your answer is 123.45% or 1.2345 then enter as 1.23 in the answer box.

Step by Step Solution

3.51 Rating (158 Votes )

There are 3 Steps involved in it

Step: 1

To calculate the Sharpe ratio we first need to calculate the excess return of the p... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Statistics In Practice

Authors: Bruce Bowerman, Richard O'Connell

6th Edition

0073401838, 978-0073401836

More Books

Students also viewed these Accounting questions

Question

What is the underlying tenet of expectancy theory?

Answered: 1 week ago

Question

23. What causes astigmatismpg109

Answered: 1 week ago