Question: The expected return of Security A is 10% with a standard deviation of 20%. The expected return of Security B is 15% with a standard

The expected return of Security A is 10% with a standard deviation of 20%. The expected return of Security B is 15% with a standard deviation of 30%. Securities A and B have a correlation of 0.3. The market return is 12% with a standard deviation of 18% and the risk free rate is 3.5%. What is the Sharpe ratio of a portfolio if 40% of the portfolio is in Security A and the remainder in Security B?

Step by Step Solution

★★★★★

3.42 Rating (171 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Computation of the Portfolios Sharpe Ratio Here we need to fin... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-F-F-M (678).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

The expected return of ABC is 18 percent, and the expected return of DEF is 23 percent. Their standard deviations are 12 percent and 20 percent, respectively. If a portfolio is composed of 35 percent...

The expected return of ABC is 15 percent, and the expected return of DEF is 23 percent. Their standard deviations are 10 percent and 23 percent, respectively, and the correlation coefficient between...

The expected return of portfolio is 9.40% and the risk free rate is 4.10%. If the portfolio standard deviation is 18%, what is the reward to variability ratio of the portfolio? A. 0.27 B. 1.60 C....

Hi, Please help me on these questions. Thank you Economic Information : The Quinns expect inflation to average 3% per year until they retire. They anticipate Jims salary will increase 10% annually,...

(a) Mr Adani invests in two risky securities with the following details: Security 1: 1=0.16; 1=0.30; Security 2: 2=0.08; 2=0.25 Where 1 is the expected return of security 1 and 1 is the standard...

Please show all work! See attachment there is 14 questions please show work and explain answer FIN 631 / Security Analysis & Portfolio Management Round numbers to four (4) significant decimal places;...

The expected return of Security A is 11% with a standard deviation of 15%. The expected return of Security B is 8% with a standard deviation of 19%. Securities A and B have a correlation of 0.8. The...

50132 The expected return of Security A is 11% with a standard deviation of 15%. The expected return of Security B is 8% with a standard deviation of 19%. Securities A and B have a correlation of...

The expected return of Security A is 9% with a standard deviation of 15%. The expected return of Security B is 8% with a standard deviation of 18%. Securities A and B have a correlation of 0.9. The...

Given the following probability distribution, please answer question I and 2. State Pr 0.2 10% 0.3 1. What is the expected return for Security J? 2. What is the standard deviation of returns for...

Use the duality transformation (Prob. 7.60) to construct the electric and magnetic fields of a magnetic monopole qm in arbitrary motion, and find the "Larmor formula" for the power radiated.

Karl has a small farm with a net income of $69,000. He also earns $88,000 before taxes from his off-farm job at a newspaper company. While Federal Insurance Contributions (FICA) or payroll Taxes are...

Referring to Problem 14.86, instead of predicting the unit density, you now wish to predict the foam diameter from results stored in PackagingFoam4 . Develop a multiple regression model that uses die...

Why is it important to classify expenses into capital expenditure and revenue expenditure?

It is December 31 and time for you to close the books for Brett Tilman Enterprises. Requirement 1. Journalize the closing entries for Brett Tilman Enterprises: a. Service revenue, $20,600. b. Make a...

It is December 31 and time for your business to close the books. The following balances appear on the books of Sarah Simon Enterprises: a. Dividends, $8,500. b. Service revenue, $23,700. c. Expense...

Brown Insurance Agency reported the following items at November 30, 2012: Requirement 1. Journalize Browns closing entries, as needed for theseaccounts. Sales and marketing expense Other assets...

Let X be a random variable, which has a density function f depending on the parameter > 1 f ( x ; ) = {( 1 ) ( x 2 ) 2 , when 2 3 and 0 , otherwise. We have a random sample ( X 1 , ... , X n ) , the...

Consider a 3-year risk-free bond, which pays annual coupons. The coupon rate is 3.5% and the face value is 500. The bond is issued at time t=0, pays coupons at time t=1,2,3 and face value at time...

In the class BinaryNodeTree, the public traversal methods each call a protected method that performs the actual recursion.a . Trueb. False