You're evaluating various investment opportunities and you have the following information about five different well-diversified portfolios of risky assets. Interest rate rf = 5%. 1: E(r)= 8.8%, σ= 10.5% 2: E(r)= 10.00%, σ= 12.0% 3: E(r)= 5.6%, σ= 5.0% 4: E(r)= 11.7%, σ= 20.5% 5: E(r)= 7.2%, σ= 8.5% Answer the following questions: (a) Find the Sharpe ratio for each portfolio. (b) Which of these five portfolios is most likely to be the optimal risky portfolio and why (c) Suppose you are willing to invest with σ = 17.9%. What are the investment proportions in the riskless asset and the optimal risky portfolio? What is the expected return for this investment?
*only interested in the answer for question c, questions a and b are only included for context.
You're evaluating various investment opportunities and you have the following information about five different well-diversified portfolios of risky assets. Interest rate rf = 5%.
1: E(r)= 8.8%, σ= 10.5%
2: E(r)= 10.00%, σ= 12.0%
3: E(r)= 5.6%, σ= 5.0%
4: E(r)= 11.7%, σ= 20.5%
5: E(r)= 7.2%, σ= 8.5%
Answer the following questions:
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(a) Find the Sharpe ratio for each portfolio.
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(b) Which of these five portfolios is most likely to be the optimal risky portfolio and why
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(c) Suppose you are willing to invest with σ = 17.9%. What are the investment proportions in the riskless asset and the optimal risky portfolio? What is the expected
return for this investment ?
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