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see attached - not sure how to do ii - help appreciated thanks 2) a. A panicular economy contains only two risky assets. it and

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see attached - not sure how to do ii - help appreciated thanks

image text in transcribed
2) a. A panicular economy contains only two risky assets. it and Y. plus a risk-free asset. Asset prices in this economy satisfy the CAPM. Data on the two assets are given below. The correlation between returns on the two assets is exactly one third. Shares Price El: R 1 Return volatility 5D 2|]L 0.21 13.15 SD 25 (115 CLUB i. Compute the market portfolio weights. the expected return on the market and the standard deviation of the market return. {5 marks} ii. Compute the bets on teeth assets. Comment on their absolute and relative magnitudes. {5 marks} iii. Calculate the risk-free rate in this economy. (2 marks} iv. Compute Sharpe ratios for x and 'r' and for the market portfolio. Comment on their relative magnitudes and. in particular. on the size of the market sharpe ratio relative to those on X and Y. {3 marks}

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