Calculate the reward-to-variability(Sharpe)ratio if you have 75% in Security C and 25% inSecurity D with a risk-free rate of 3%.Year A, % B, % C, % D, % E, %1 10.67 -3.76 12.9825.518.96 0.3423412.54 21.67 45.23 18.97 29.67 15.94-8.82 19.84 16.52 -11.57-12.07 4.665.56 13.37 14.28 21.42 25.68 -4.4527.34 4.98 -15.53 26.22 31.08 15.1421.94 11.35 1.28 17.23 -12.87 -2.89560.780.9301.06S&P,%0.87

The Sharpe Ratio essentially measures the excess return earned per unit of risk taken. A higher…

Answered: Calculate the reward-to-variability…

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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There is one period. Assume a representative agent with utility function U(ct) = αc_t − βc^2_tassume the following: α = 100, β = 1, and δ = 0.97. Consumption at t = 0 is C0 = 24. At t = 1 one of two states θ1 and θ2 eventuate with probability π1 = 0.5, and π2 = 0.5,respectively. There are two complex securities s^1 and s^2.s^1 has a payoff of 23 in θ1 and 27 in θ2.s^2 has a payoff of 20 in θ1 and 32 in θ2.What is the stochastic discount factor mt+1? hint: Recall mt+1 =δU′(ct+1)/U′(ct)
PLEASE DO THIS IN EXCEL
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Calculate the reward-to-variability (Sharpe) ratio if you have 75% in Security C and 25% in Security D with a risk-free rate of 3%.