Find the optimal risky portfolio if you could only use these two funds, ABC and 123, assume the two funds have a correlation coefficient of 0.3. (To do this use excel and create 101 different combination of the two funds, where allocation or “w” for fund ABC is 0, then .01, then .02 and so forth until w=1. For each of these points calculate the Sharpe ratio. Graph these results with returns on the y axis and S.D on the x axis. Remember to report the return and standard deviation of the optimal risky portfolio.) The risk free rate is .02. ABC 123 Expected return 0.12 0.15 sd 0.2 0.3 Correlation coeffcient betweeen both 0.4 Find the w (the weight in fund ABC) that leads to the highest sharpe ratio (only consider the 101 different combinations, so the final answer will only have no more than two decimal places)
Find the optimal risky portfolio if you could only use these two funds, ABC and 123, assume the two funds have a correlation coefficient of 0.3. (To do this use excel and create 101 different combination of the two funds, where allocation or “w” for fund ABC is 0, then .01, then .02 and so forth until w=1. For each of these points calculate the Sharpe ratio. Graph these results with returns on the y axis and S.D on the x axis. Remember to report the return and standard deviation of the optimal risky portfolio.) The risk free rate is .02.
| ABC | 123 | |
|
Expected return |
0.12 | 0.15 |
| sd | 0.2 | 0.3 |
| Correlation coeffcient betweeen both | 0.4 |
Find the w (the weight in fund ABC) that leads to the highest sharpe ratio (only consider the 101 different combinations, so the final answer will only have no more than two decimal places)
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