In the preceding question, what percentage of your portfolio should you invest in US stocks to maximize your Sharpe ratio? Round to the nearest $1\%.$

$36\%$

$43\%$

$57\%$

None of the above

Suppose you expect that the Sharpe ratio of the market will be $0\mathrm{.}4.$ Suppose an active mutual fund has a Sharpe ratio of $0\mathrm{.}2$ and a CAPM information ratio of $0\mathrm{.}1.$ Which of the following portfolios has the highest Sharpe ratio? Assume the mutual fund has the same volatility as the market and no short sales are allowed.

The market only

The mutual fund only

A mixture of the market and the mutual fund

All portfolios above have lower expected returns than the risk$-$free asset