The Optima Mutual Fund has an expected return of 20%, and a volatility of 20%. Optima claims

Question:

The Optima Mutual Fund has an of 20%, and a volatility of 20%. Optima claims that no other offers a higher Sharpe ratio. Suppose this claim is true, and the risk-free interest rate is 5%.
a. What is Optima’s Sharpe Ratio?
b. If eBay’s stock has a volatility of 40% and an of 11%, what must be its correlation with the Optima Fund?
c. If the SubOptima Fund has a correlation of 80% with the Optima Fund, what is the Sharpe ratio of the SubOptima Fund?

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...