The optimal risky portfolio has a Sharpe ratio of 0.8 and a standard deviation of 20%. The minimum variance portfolio in the market has a standard deviation of 15% and an expected return of 12%. The risk-free rate is 1%. Alex is close to her retirement and willing to take on a low level of risk, with a maximum standard deviation of 10%. With an initial investment of $50,000, the maximum value her portfolio can achieve in one year's time is: $ (assume all returns are quoted on annual basis.)
The optimal risky portfolio has a Sharpe ratio of 0.8 and a standard deviation of 20%. The minimum variance portfolio in the market has a standard deviation of 15% and an expected return of 12%. The risk-free rate is 1%. Alex is close to her retirement and willing to take on a low level of risk, with a maximum standard deviation of 10%. With an initial investment of $50,000, the maximum value her portfolio can achieve in one year's time is: $ (assume all returns are quoted on annual basis.)
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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Transcribed Image Text:The optimal risky portfolio has a Sharpe ratio of 0.8 and a standard deviation of 20%. The minimum variance portfolio in the market has a standard deviation of 15%
and an expected return of 12%. The risk-free rate is 1%. Alex is close to her retirement and willing to take on a low level of risk, with a maximum standard deviation of
10%. With an initial investment of $50,000, the maximum value her portfolio can achieve in one year's time is: $
. (assume all returns are quoted on annual
basis.)
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