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15. Assume the risk-free rate is 4%. You are a financial advisor, and must choose one of the funds below to recommend to each of your clients. Whichever fund you recommend, your clients will then combine it with risk-free borrowing and lending depending on their desired level of risk. Expected Return Volatility Fund A 10% 10% Fund B 15% 22% Fund C 6% 2% Fund A Fund B Fund C Expected Return 10% 15% 6% Volatility 10% 22% 2% Which fund would you recommend (without knowing your client's risk preferences)? The fund you should recommend to each of your clients is Fund A, B or C? 16. In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently, the risk-free rate of interest is 4%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 80%, and a correlation of 0.2 with the Tanglewood Fund. Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund? b. What is the Sharpe ratio of your new portfolio? c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and round your answer to two decimal places.) a. What is the Sharpe ratio of the Tanglewood Fund? (Round all intermediate values to five decimal places as needed.) The Sharpe ratio of the Tanglewood Fund is _____? (Round to two decimal places.) 17. Suppose the risk-free return is 2.8% and the market portfolio has an expected return of 11.9% and a volatility of 14.7%. Merck & Co. (Ticker: MRK) stock has a 21.6% volatility and a correlation with the market of .052. a. What is Merck's beta with respect to the market? b. Under the CAPM assumptions, what is its expected return? a. What is Merck's beta with respect to the market? Merck's beta with respect to the market is ______?(Round to three decimal places.)