What is the Sharpe ratio of the best feasible CAL? Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places. 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
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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third
is a money market fund that provides a safe return of 7%. The characteristics of the risky funds are as follows:
Stock fund (S)
Bond fund (B)
Expected
Return
22%
12
Standard
Deviation
32%
19
The correlation between the fund returns is 0.11.
Sharpe ratio
What is the Sharpe ratio of the best feasible CAL?
Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.
Transcribed Image Text:A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 7%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 22% 12 Standard Deviation 32% 19 The correlation between the fund returns is 0.11. Sharpe ratio What is the Sharpe ratio of the best feasible CAL? Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.
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