Question
Superior Fund has a Sharpe ratio of 0.50 and a standard deviation of 20%, and a client of yours has invested 40% of her investment
Superior Fund has a Sharpe ratio of 0.50 and a standard deviation of 20%, and a client of yours has invested 40% of her investment budget in Superior and the rest in a riskfree asset earning 2%. Stupendous Fund has a Sharpe ratio of 0.48 and an expected return of 14%. If Superior Fund were to go out of business, how could your client use the Stupendous Fund (along with the risk free asset) to earn the same expected return as before, and what standard deviation would she face?
I need the standard deviation for this problem, only been able to get is the stupendous and how much to invest.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started