Question
You create a complete portfolio with a risk-free asset with a return of 6% and a stock with an expected return of 15% and a
You create a complete portfolio with a risk-free asset with a return of 6% and a stock with an expected return of 15% and a standard deviation (risk) of 25%. You put 60% of the portfolio value in the risky asset and 40% in the risk-free asset. Is the Sharpe ratio of the complete portfolio greater than, less than, or equal to the Sharpe ratio of the stock? Explain. (Note: You do not need to do any calculations to answer this problem. You can support your answer with calculations, but a quantitative-only solution is not sufficient for an explanation.)
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