Question
Assume you have a risky portfolio with an 10% expected return and a 30% standard deviation. The risk-free rate is 5%. Now you construct a
Assume you have a risky portfolio with an 10% expected return and a 30% standard deviation. The risk-free rate is 5%.
Now you construct a complete portfolio by investing 90% in this risky portfolio and 10% in the risk-free asset. You hope to have an overall portfolio return of 16%.
(a) Compute the expected return of this complete portfolio.
(b) Compute the standard deviation of the complete portfolio. (Hint: Standard deviation of the complete portfolio = proportion of investment placed on the risky portfolio * standard deviation of the risky portfolio)
(c) What is the Sharpe ratio of your risky portfolio?
PLEASE PROVIDE EXPLANATION AND WALK THROUGH Thank you! :)
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Local Government Finance And Bond Markets
Authors: Yun-Hwan Kim, Ifzal Ali
1st Edition
9715615015, 9789715615013
