Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has an expected return of 13% and a standard deviation of 20%. Gamiori has an expected return of 6% and a standard deviation of 10%. The correlation coefficient between the returns of Origami and Gamiori is 0.30. The risk-free rate of return is 2%. What is the Sharpe ratio of the optimal risky portfolio? A. 60.26% B. 12.19% C. 9.34% D. 47.78%

Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has an expected return of 13% and a standard deviation of 20%. Gamiori has an expected return of 6% and a standard deviation of 10%. The correlation coefficient between the returns of Origami and Gamiori is 0.30. The risk-free rate of return is 2%. What is the Sharpe ratio of the optimal risky portfolio? A. 60.26% B. 12.19% C. 9.34% D. 47.78%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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Question

A. 60.26%

B. 12.19%

C. 9.34%

D. 47.78%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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