Question
You are evaluating the performance of a portfolio that invests in two different bond ETFs: the PIMCO Total Return Active ETF (BOND) and the Blackrock
You are evaluating the performance of a portfolio that invests in two different bond ETFs: the PIMCO Total Return Active ETF (BOND) and the Blackrock iShares 7-10-Year Treasury ETF (IEF). 75% of the portfolio's money is invested in BOND. The remaining 25% of the portfolio's money is invested in IEF.
BOND has expected excess returns of 3.85%; the standard deviation of BOND's returns is 3.82%. IEF has expected excess returns of 4.85%; the standard deviation of IEF's returns is 6.38%.
The correlation between the returns of BOND and IEF is 0.60.
a) What is the portfolio's expected excess return (Answer in %)?
b) What is the standard deviation of the portfolio's returns (Answer in percent)?
c) What is the Sharpe ratio of the portfolio's returns?
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