Question 1 Use the following table to answer the questions a-c below. Standard deviation of risky return portfolio 1.5 Risky Sharpe-ratio Expected return on risky portfolio Risk-free Portfolio 1 8 4 9. 1.75 4 3 10 4 4 11 2.25 4 a. Calculate the Sharpe ratio for each portfolio b. Identify the optimal portfolio from the above 4 Question 2 Suppose all investors use the market perceptions of risk and expected return and are thus using the same set of efficient portfolios. a. Draw the efficient set of portfolios and the CML for the optimal portfolio. efficient set b. Explain why all investors should choose the same risky portfolio from the efficient set c. Identify on the CML two investors; one who is risk averse and one who is not

Question 1 Use the following table to answer the questions a-c below. Standard deviation of risky return portfolio 1.5 Risky Sharpe-ratio Expected return on risky portfolio Risk-free Portfolio 1 8 4 9. 1.75 4 3 10 4 4 11 2.25 4 a. Calculate the Sharpe ratio for each portfolio b. Identify the optimal portfolio from the above 4 Question 2 Suppose all investors use the market perceptions of risk and expected return and are thus using the same set of efficient portfolios. a. Draw the efficient set of portfolios and the CML for the optimal portfolio. efficient set b. Explain why all investors should choose the same risky portfolio from the efficient set c. Identify on the CML two investors; one who is risk averse and one who is not

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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