Calculate the excess portfolio expected return per unit of risk for each combination of weights. The excess portfolio expected return is the difference between the portfolio's expected return and the risk-free rate. Assume the risk-free rate is 3.6%. The risk-free rate is the current 10-year Australian government bond coupon rate. Explain your answer clearly and show your workings.

Transcribed Image Text:

1 2 12 13 Mean STD 14 15 16 17 18 3 4 5 6 Weight of WBP.AX Weight of AORD 7 8 9 10 11 AORD 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 3.67% 13.98% 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 WBP 10.94% 16.08% Portfolio risk 3.65% 4.74% 5.84% 6.95% 8.08% 9.23% 10.39% 11.57% 12.77% Correlation (WBP, AORD) 40% Portfolio return 10.21% 9.49% 8.76% 8.03% 7.31% 6.58% 5.85% 5.12% 4.40% 1 2 12 13 Mean STD 14 15 16 17 18 3 4 5 6 Weight of WBP.AX Weight of AORD 7 8 9 10 11 AORD 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 3.67% 13.98% 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 WBP 10.94% 16.08% Portfolio risk 3.65% 4.74% 5.84% 6.95% 8.08% 9.23% 10.39% 11.57% 12.77% Correlation (WBP, AORD) 40% Portfolio return 10.21% 9.49% 8.76% 8.03% 7.31% 6.58% 5.85% 5.12% 4.40%