Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks. Assume that these two portfolios are equal in size (market value), the correlation of their returns is equal to 0.6, and the portfolios have the following characteristics: Expected Return Volatility Value Stocks 0.12 14% Growth Stocks 0.15 24% The risk free rate is 3.5%. what is the sharpe ratio?
Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks. Assume that these two portfolios are equal in size (market value), the correlation of their returns is equal to 0.6, and the portfolios have the following characteristics: Expected Return Volatility Value Stocks 0.12 14% Growth Stocks 0.15 24% The risk free rate is 3.5%. what is the sharpe ratio?
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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- Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks. Assume that these two portfolios are equal in size (market value), the correlation of their returns is equal to 0.6, and the portfolios have the following characteristics:
|
|
Expected Return |
Volatility |
|
Value Stocks |
0.12 |
14% |
|
Growth Stocks |
0.15 |
24% |
The risk free rate is 3.5%. what is the sharpe ratio?
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