BKM Ch$6$ problems $($Connect$/$Problem Sets$)3,8,17$

A portfolio's expected return is $12\%,$ its standard deviation is $20\%,$ and the risk$-$free rate is $4\%.$ What Sharpe ratio

would result from each of the following changes?

a$)$ An increase of $1\%$ in the portfolio's expected return.

b$)$ A decrease of $1\%$ in the risk$-$free rate.

c$)$ A decrease of $1\%$ in the portfolio's standard deviation.

A pension fund manager is considering three mutual funds, a stock fund with expected return of $15\%$ and standard

deviation of $32\%,$ a bond fund with expected return of $9\%$ and standard deviation of $23\%,$ and a money market fund

with a sure rate of $5\mathrm{.}5\%.$ The correlation between the stock and bond funds is $0\mathrm{.}15.$ Tabulate and draw the investment

opportunity set of the two risky funds, using investment proportions for the stock fund from $0\%$ to $100\%$ in

increments of $20\%.$ What is the lowest$-$risk of these combinations of the stock and bond funds?

Your assistant gives you the diagram below as the efficient frontier of the group of stocks you asked him to

analyze. The diagram looks a bit odd, but your assistant insists he double$-$checked his analysis. Could an efficient

frontier have that shape $--$ why or why not?