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Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is given: E( r A )=10%, E( r
Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is given: E(rA)=10%, E(rB)=12%, A=15%, B=20%, AB=0.4, rf=2%. Denote the optimal risky portfolio investor can achieve with the highest Sharpe ratio by portfolio O
- Calculate the weights of A and B (wA and wB) in the optimal risky portfolio O. (5 pts)
- Calculate the expected return and standard deviation of return for portfolio O. (6 pts)
- Calculate the Sharpe ratio of portfolio O. (4 pts)
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