Information:

James, a portfolio manager, would like to form the following portfolio between Microsoft and Coca-Cola:

Expected return (%) Standard Deviation (%) Weight

Microsoft 28 42 0.4

Coca-Cola 12.5 21 0.6

The correlation between the two stocks is 0.5.

James decides to follow her wifes suggestion. But, he would prefer a lower volatility for his investment. He decides to invest 40% of his wealth into the T-bills, and 60% in Rachels portfolio.

He would invest 40% into the T-bills, 36% into Microsoft, and 24% into Coca-Cola.

Question:

What is the standard deviation for James new portfolio? ______%

Suppose the interest rate of the T-bills is 3.8%. What is the Sharpe ratio of James new portfolio?