QUESTION 43

1. A three-month Treasury bill is currently yielding 5%. The expected return and the standard deviation of the portfolio with the highest Sharpe ratio equal 12.5% and 10%, respectively. Assuming the point of tangency between the investors indifference curve and the CML results in a return of 10.25%, compute for the standard deviation of the investors optimal portfolio.

	a.	5%
	b.	7%
	c.	6%