2.) Consider the expected returns, standard deviations, Sharpe ratios, and correlation matrix for three stocks: Correlation Matrix Pij Stock E(Ri) Stock 1 Stock 2 Stock 3 Sharpe 1 0.13 0.21 1.00 0.10 0.35 0.476 2 0.16 0.22 0.10 1.00 0.72 0.591 3 0.24 0.59 0.35 0.72 1.00 0.356 Use the Solver function in Excel to find the portfolio weights, portfolio expected return E(rp), portfolio standard deviation σp, and Sharpe ratio for the following optimal portfolios: P a.) The risky asset portfolio that minimizes standard deviation for a target expected return of 18%. Do not constrain short-sales. b.) The risky asset portfolio that maximizes the Sharpe ratio, short sales. Assume a risk-free rate of 3%. E(rp)-rf бр . Do not constrain
2.) Consider the expected returns, standard deviations, Sharpe ratios, and correlation matrix for three stocks: Correlation Matrix Pij Stock E(Ri) Stock 1 Stock 2 Stock 3 Sharpe 1 0.13 0.21 1.00 0.10 0.35 0.476 2 0.16 0.22 0.10 1.00 0.72 0.591 3 0.24 0.59 0.35 0.72 1.00 0.356 Use the Solver function in Excel to find the portfolio weights, portfolio expected return E(rp), portfolio standard deviation σp, and Sharpe ratio for the following optimal portfolios: P a.) The risky asset portfolio that minimizes standard deviation for a target expected return of 18%. Do not constrain short-sales. b.) The risky asset portfolio that maximizes the Sharpe ratio, short sales. Assume a risk-free rate of 3%. E(rp)-rf бр . Do not constrain
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:2.) Consider the expected returns, standard deviations, Sharpe ratios, and correlation matrix
for three stocks:
Correlation Matrix Pij
Stock
E(Ri)
Stock 1 Stock 2
Stock 3
Sharpe
1
0.13
0.21
1.00
0.10
0.35
0.476
2
0.16
0.22
0.10
1.00
0.72
0.591
3
0.24
0.59
0.35
0.72
1.00
0.356
Use the Solver function in Excel to find the portfolio weights, portfolio expected return
E(rp), portfolio standard deviation σp, and Sharpe ratio for the following optimal portfolios:
P
a.) The risky asset portfolio that minimizes standard deviation for a target expected return
of 18%. Do not constrain short-sales.
b.) The risky asset portfolio that maximizes the Sharpe ratio,
short sales. Assume a risk-free rate of 3%.
E(rp)-rf
бр
. Do not constrain
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