PLEASE ANSWER BOTH PARTS:

PART A:

The return statistics for two stocks and T-bills are given below:

	A	B	C	D
1		Stock A	Stock B	T-bills
2	Expected return	0.094	0.061	0.02
3	Variance	0.1521	0.0729
4	Standard deviation	0.39	0.27
5	Covariance	0.03159

What is the Sharpe ratio of a portfolio with 40% invested in stock A and the rest in stock B?

PART B:

Answer part 3: Still assuming a portfolio composed of $1,800 optimal risky portfolio and $16,200 risk-free asset, how much money should you invest in stock B (in $)?

Intro You have $18,000 and want to invest it in the two stocks below and the risk-free asset, Treasury bills: A B D 1 Stock A Stock B T-bills 2 Expected return 0.093 0.061 0.02 3 Variance 0.1156 4 Standard deviation 0.34 5 Covariance 0.02754 Part 1 What is the Sharpe ratio of the optimal risky portfolio? 0.2335 Correct Use Excel's Solver tool to: Set objective: B12 (the Sharpe ratio) To: Max (maximize the Sharpe ratio) By changing variable cells: B8 (the weight on stock A) A B C 1 Stock B T-bills Stock A 0.093 2 Expected return 0.061 0.02 3 Variance 0.1156 4 Standard deviation 0.34 5 Covariance 0.02754 6 7 Optimal risky portfolio O Weights 0.0729 0.27 0.0729 0.2012 -1 DQ Attempt 2/10 for 2.2 pts. D Part 2 Attempt 1/10 for 2.2 pts. What is the standard deviation of a portfolio composed of $1,800 optimal risky portfolio and $16,200 risk-free asset? 0.025865 Correct A B C D 1 Stock A Stock B T-bills 2 Expected return 0.093 0.061 0.02 3 Variance 0.1156 4 Standard deviation 0.34 5 Covariance 0.02754 6 Optimal risky 7 portfolio 8 Weights 0.606 9 Expected return 0.0804 10 Variance 0.0669 11 Standard deviation 0.2586 12 Sharpe ratio 0.2335 13 14 Complete portfolio 15 Investment 18,000 16 Inv. in ORP 1,800 17 Weight on ORP 0.1 18 Expected return 0.02604 19 Standard deviation 0.02586 0.0729 0.27 0.3943 1-B8 =B8*B2+C8*C2 =B8^2*B3+C8^2*C3+2*B8*C8*B5 =B10^0.5 =(B9-D2)/B11 =B16/B15 =B17*B9+(1-B17)*D2 =B17*B11 Attempt 2/10 for 2.2 pts. Part 3 Still assuming a portfolio composed of $1,800 optimal risky portfolio and $16,200 risk-free asset, how much money should you invest in stock B (in $)? 0+ decimals Submit Intro You have $18,000 and want to invest it in the two stocks below and the risk-free asset, Treasury bills: A B D 1 Stock A Stock B T-bills 2 Expected return 0.093 0.061 0.02 3 Variance 0.1156 4 Standard deviation 0.34 5 Covariance 0.02754 Part 1 What is the Sharpe ratio of the optimal risky portfolio? 0.2335 Correct Use Excel's Solver tool to: Set objective: B12 (the Sharpe ratio) To: Max (maximize the Sharpe ratio) By changing variable cells: B8 (the weight on stock A) A B C 1 Stock B T-bills Stock A 0.093 2 Expected return 0.061 0.02 3 Variance 0.1156 4 Standard deviation 0.34 5 Covariance 0.02754 6 7 Optimal risky portfolio O Weights 0.0729 0.27 0.0729 0.2012 -1 DQ Attempt 2/10 for 2.2 pts. D Part 2 Attempt 1/10 for 2.2 pts. What is the standard deviation of a portfolio composed of $1,800 optimal risky portfolio and $16,200 risk-free asset? 0.025865 Correct A B C D 1 Stock A Stock B T-bills 2 Expected return 0.093 0.061 0.02 3 Variance 0.1156 4 Standard deviation 0.34 5 Covariance 0.02754 6 Optimal risky 7 portfolio 8 Weights 0.606 9 Expected return 0.0804 10 Variance 0.0669 11 Standard deviation 0.2586 12 Sharpe ratio 0.2335 13 14 Complete portfolio 15 Investment 18,000 16 Inv. in ORP 1,800 17 Weight on ORP 0.1 18 Expected return 0.02604 19 Standard deviation 0.02586 0.0729 0.27 0.3943 1-B8 =B8*B2+C8*C2 =B8^2*B3+C8^2*C3+2*B8*C8*B5 =B10^0.5 =(B9-D2)/B11 =B16/B15 =B17*B9+(1-B17)*D2 =B17*B11 Attempt 2/10 for 2.2 pts. Part 3 Still assuming a portfolio composed of $1,800 optimal risky portfolio and $16,200 risk-free asset, how much money should you invest in stock B (in $)? 0+ decimals Submit