Let us suppose that there are two risky assets that you are planning to combine with the risk-free asset to form a portfolio. You are a risk-averse mean-variance investor. Asset E(r) A 0.15 0.2 B 0.14 0.2 risk-free 0.05 0

3. Calculate the expected return and volatility (volatility = square root of variance) of your portfolio for w ranging from -0.5 to 1.5 by increments of 0.1 (i.e. w = -0.5, -0.4, -0.3, ...). Create a table displaying the expected return and volatility for different values of w.

4. Add a Sharpe Ratio column to the table that you created in Question 3. Of all of the rows in the table, which has the largest Sharpe Ratio?

5. Calculate the expected return, volatility, and Sharpe Ratio of the optimal risky port-folio. How does the Sharpe Ratio compare to the ones in the table in Question 4?