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You have been provided with the below information related to potential returns on bonds and shares under different economic conditions. Scenario Probability Return.on.Shares Return.on.Bonds Boom
You have been provided with the below information related to potential returns on bonds and shares under different economic conditions.
Scenario | Probability | Return.on.Shares | Return.on.Bonds |
Boom | 8% | 47% | 15% |
Positive Growth | 14% | 44% | 7% |
Normal Growth | 35% | 6% | 5% |
Negative Growth | 30% | 2% | 2% |
Recession | 5% | -8% | -1% |
Crash | 8% | -17% | -6% |
Question 6 Assuming a risk-free rate of 4.5%, calculate the optimal weight in shares and bonds that results in an optimal Sharpe Ratio. A) 98.64% in Bonds; 1.36% in Shares B) 122.31% in Bonds; -22.31% in Shares C) 161.77% in Bonds; -61.77% in Shares D) 142.04% in Bonds; -42.04% in Shares E) 131.52% in Bonds; -31.52% in Shares
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