You are comparing the performance of your portfolio against your benchmark over the last 8 years. You have collected the following data:

Year	Portfolio	Benchmark
1	12%	10%
2	6%	13%
3	10%	11%
4	11%	9%
5	16%	12%
6	14%	10%
7	8%	13%
8	18%	10%

Assume that the risk-free rate over this period averaged 2%. Given this information, calculate the optimal levels of active risk and active return for your portfolio, along with the Sharpe ratio for the optimal active portfolio.

Answer rating: 100% (QA)

Calculating Optimal Active Risk and Return Step 1 Calculate Excess Returns For each year subtract th... View the full answer