Suppose you have drawn the Capital Allocation Line (CAL) through the risk-free asset (which has a...

Transcribed Image Text:

Suppose you have drawn the Capital Allocation Line (CAL) through the risk-free asset (which has a rate of 4.7%) and a risky asset that has expected return 10.5% and sigma of 23.1%. A. Consider a portfolio on the CAL that puts 21% of wealth in the risk-free asset and the rest in the risky asset. What would be the expected return, sigma, and Sharpe Ratio of that portfolio? Expected Return (% rounded to 2 decimals, e.g,. 8.52%): Sigma (%, rounded to 2 decimals, e.g,. 8.52%): % Sharpe Ratio (decimal, rounded to 2 decimals, e.g,. 0.75): % B. Consider a portfolio on the CAL that puts 102% of wealth in the risky asset and the rest in the risky asset. What would be the expected return, sigma, and Sharpe Ratio of that portfolio? Expected Return (% rounded to 2 decimals, e.g,. 8.52%): Sigma (%, rounded to 2 decimals, e.g. 8.25%): % Sharpe Ratio (decimal, rounded to 2 decimals, e.g,. 0.75): % C. Suppose a client wanted to earn an expected return of 14% and be on the CAL line that you've drawn (i.e., some combination of risk-free and the risky asset). What would be the weights of that portfolio? Weight in the Risk-Free Asset (decimal, rounded to 2 decimal places, e.g., 0.24): Weight in the Risky Asset (decimal, rounded to 2 decimal places, e.g., 0.24): Suppose you have drawn the Capital Allocation Line (CAL) through the risk-free asset (which has a rate of 4.7%) and a risky asset that has expected return 10.5% and sigma of 23.1%. A. Consider a portfolio on the CAL that puts 21% of wealth in the risk-free asset and the rest in the risky asset. What would be the expected return, sigma, and Sharpe Ratio of that portfolio? Expected Return (% rounded to 2 decimals, e.g,. 8.52%): Sigma (%, rounded to 2 decimals, e.g,. 8.52%): % Sharpe Ratio (decimal, rounded to 2 decimals, e.g,. 0.75): % B. Consider a portfolio on the CAL that puts 102% of wealth in the risky asset and the rest in the risky asset. What would be the expected return, sigma, and Sharpe Ratio of that portfolio? Expected Return (% rounded to 2 decimals, e.g,. 8.52%): Sigma (%, rounded to 2 decimals, e.g. 8.25%): % Sharpe Ratio (decimal, rounded to 2 decimals, e.g,. 0.75): % C. Suppose a client wanted to earn an expected return of 14% and be on the CAL line that you've drawn (i.e., some combination of risk-free and the risky asset). What would be the weights of that portfolio? Weight in the Risk-Free Asset (decimal, rounded to 2 decimal places, e.g., 0.24): Weight in the Risky Asset (decimal, rounded to 2 decimal places, e.g., 0.24):