Loans Industry 1 Industry 2 Portfolio Weight 0.65 0.35 Annual Spread 4.25% 2.75% Fees Earned 3.0% 2.5% Loss to Fl given Default 50% 20% Expected Default Frequency 5.5% 3% Correlation 0.30 Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. What is the Sharpe Ratio for this portfolio if the risk free rate is 1.5%?

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
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Loans
Industry 1
Industry 2
Portfolio Weight
0.35
0.65
2.75%
Annual Spread
4.25%
Fees Earned
3.0%
2.5%
Loss to FI given Default
50%
20%
Expected Default Frequency
5.5%
3%
Correlation
0.30
Use the table to answer the question. A financial institution has outstanding loans to two industries:
Industry 1 and Industry 2. What is the Sharpe Ratio for this portfolio if the risk free rate is 1.5%?
O 0.39
0.77
O 1.40
2.05
Transcribed Image Text:Loans Industry 1 Industry 2 Portfolio Weight 0.35 0.65 2.75% Annual Spread 4.25% Fees Earned 3.0% 2.5% Loss to FI given Default 50% 20% Expected Default Frequency 5.5% 3% Correlation 0.30 Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. What is the Sharpe Ratio for this portfolio if the risk free rate is 1.5%? O 0.39 0.77 O 1.40 2.05
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