Problem 21

You have $70,000 to invest. You've done some security analysis and generated the following data for two stocks and Treasury bills:

Security	Stock A	Stock B	T-bills
Expected return (%)	12	6	2
Variance	0.04	0.0144	0
Correlation with stock A	1	0.1	0

Attempt 2/10 for 8 pts.

Part 1

What is the weight of stock A in the optimal risky portfolio (ORP)?

Attempt 1/10 for 10 pts.

Part 2

If you invest 80% of your funds in T-Bills, what is the expected return of this complete portfolio?

Attempt 1/10 for 10 pts.

Part 3

What is the standard deviation of the optimal risky portfolio?

Attempt 1/10 for 10 pts.

Part 4

What is the Sharpe ratio of your complete portfolio?

Attempt 1/10 for 10 pts.

Part 5

How much money do you have to invest in stock B to achieve this Sharpe ratio (in $)?