You are evaluating various investment opportunities currently available and you have the fol- lowing information about five different well-diversified portfolios of risky assets. Interest rate rf = 3%.  (a) Calculate the Sharpe ratio for each portfolio.  (b) Explain which of these five portfolios is most likely to be the optimal risky portfolio (c) Suppose you are willing to invest with an expected return of 6%. What would be the investment proportions in the riskless asset and the optimal risky portfolio? What is the standard deviation of the return for this investment?

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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You are evaluating various investment opportunities currently available and you have the fol-
lowing information about five different well-diversified portfolios of risky assets. Interest rate
rf = 3%. 

(a) Calculate the Sharpe ratio for each portfolio. 


(b) Explain which of these five portfolios is most likely to be the optimal risky portfolio


(c) Suppose you are willing to invest with an expected return of 6%. What would be the
investment proportions in the riskless asset and the optimal risky portfolio? What is the
standard deviation of the return for this investment

Portfolio
1
2345
E(r)
7.8%
9.00%
5.6%
11.7%
7.2%
σ
10.5%
15.0%
6.0%
20.5%
8.4%
Transcribed Image Text:Portfolio 1 2345 E(r) 7.8% 9.00% 5.6% 11.7% 7.2% σ 10.5% 15.0% 6.0% 20.5% 8.4%
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