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Suppose you are trying to construct a portfolio that yields an expected return of 8% and you can only invest in T-bill and one of
Suppose you are trying to construct a portfolio that yields an expected return of 8% and you can only invest in T-bill and one of the two funds X and Y. Assume T-bill risk-free rate is 2% and fund X has an expected return of 5% and an expected standard deviation of 9%, whereas fund Y is expected to generate 9% return and a standard deviation of 18%. Which fund should you choose? what is the percentage weight invested in that fund? What is the Sharpe ratio of your portfolio?
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