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Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. What is the Sharpe

Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. What is the Sharpe Ratio for this portfolio if the risk free rate is 1.5%?

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Loans Portfolio Weight Annual Spread Fees Earned Loss to FI given Default Expected Default Frequency Correlation Industry 1 0.65 4.25% 3.0% 50% 5.5% 0.30 Industry 2 0.35 2.75% 2.5% 20% 3%

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