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Consider 3 assets in a single-factor APT economy where the market is the single factor. The risk-free rate is 6%. You currently hold the market
Consider 3 assets in a single-factor APT economy where the market is the single factor. The risk-free rate is 6%. You currently hold the market portfolio (M) as the risky asset you use to form a complete portfolio. What weights should you place in portfolios C or D (or both) and M, so as to maximise the Sharpe ratio of your risky portfolio. Your objective is to create a risky portfolio that has superior performance to your current (market) portfolio - not create an arbitrage strategy. There are no other investment options available to you. Show your work. When doing your calculations, please round to 6 decimal places. CIRCLE YOUR ANSWERS [11 marks] Consider 3 assets in a single-factor APT economy where the market is the single factor. The risk-free rate is 6%. You currently hold the market portfolio (M) as the risky asset you use to form a complete portfolio. What weights should you place in portfolios C or D (or both) and M, so as to maximise the Sharpe ratio of your risky portfolio. Your objective is to create a risky portfolio that has superior performance to your current (market) portfolio - not create an arbitrage strategy. There are no other investment options available to you. Show your work. When doing your calculations, please round to 6 decimal places. CIRCLE YOUR ANSWERS [11 marks]
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