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You have the choice between 2 funds A and B. However, you have to choose only one of them for you portfolio of risky assets.
You have the choice between 2 funds A and B. However, you have to choose only one of them for you portfolio of risky assets. You can also invest at the risk free rate. The A fund has an expected return of 25% and a standard deviation of return of 30%. The B fund has an expected return of 10% and a standard deviation of returns of 15%. The risk free rate is 5%. Which fund you choose and why
- The A fund, because it has the most alpha
- The B Fund because it has the most alpha
- The A Fund, because it has the higher sharpe ratio
- No answer
- The B Fund, because it has the higher sharpe ratio
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