n addition to​ risk-free securities, you are currently invested in the Tanglewood​ Fund, a​ broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the​ risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%​, a volatility of 79%​, and a correlation of 0.2 with the Tanglewood Fund. Assume you follow your​ broker's advice and put 50% of your money in the venture​ fund: a. What is the Sharpe ratio of the Tanglewood​ Fund? Answer (already calculated)= 0.458 b. What is the Sharpe ratio of your new​ portfolio? Answer (Already calculated)= 0.322 c. What is the optimal Sharpe ratio you can obtain by investing in the venture​ fund? ​(Hint​: Use Excel and round your answer to three decimal​ places.) The optimal Sharpe ratio you can obtain by investing in the venture fund is *enter your response here* and the percentage in the venture fund would be *enter your response here​%*

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
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In addition to​ risk-free securities, you are currently invested in the Tanglewood​ Fund, a​ broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the​ risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%​, a volatility of 79%​, and a correlation of 0.2
with the Tanglewood Fund. Assume you follow your​ broker's advice and put 50% of your money in the venture​ fund:

a. What is the Sharpe ratio of the Tanglewood​ Fund?
Answer (already calculated)= 0.458

b. What is the Sharpe ratio of your new​ portfolio?
Answer (Already calculated)= 0.322

c. What is the optimal Sharpe ratio you can obtain by investing in the venture​ fund?
​(Hint​: Use Excel and round your answer to three decimal​ places.)

The optimal Sharpe ratio you can obtain by investing in the venture fund is
*enter your response here* and the percentage in the venture fund would be
*enter your response here​%*
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