Question 1

Consider two risky assets A and B with E(rA)= 15%, Sigma_A= 32%, E(rB)= 0.09, Sigma_B= 23%, corrA,B= 0.2. The risk free rate is 5%. The optimal risky portfolio of comprised of the two risky assets is to allocate 64% to A and the rest to B. What is the standard deviation of the optimal risky portfolio ?

Select one:

a. 20.75%

b. 23.61%

c. 22.86%

d. 23.00%

Question 2

Continued with previous question. What is the Sharpe ratio of the optimal risky portfolio?

Select one:

a. 0.33

b. 0.35

c. 0.31

d. 0.29