Question
your current invest in a Vanguard diversified fund that gives you 12% of the expected return and 25%of the variance. When you sought investment advice
your current invest in a Vanguard diversified fund that gives you 12% of the expected return and 25%of the variance. When you sought investment advice from your financial planner, she adviced you to add private equity(PE) to your current portfolio. The PE fund has an expected return of 20% with 80%of the variance.your planner found that the correlation between your current portfolio and the PE fund is 0.2. 1. Assume that you have sold 50% of the Vanguard diversified fund that you currently hold and invested the proceed in the PE fund as per the advice.What is Sharpe ratio of your new portfolio? 2.Please find optimal weight of the PE fund.Please specify your answer up to the 4th decimal point.
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