Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is given: E(r_A)=10%,E(r_B)=12%,0_A=15%,o_B=20%, P_AB=0.4,r_f=2%. Denote the optimal risky portfolio investor can achieve with the highest Sharpe ratio by portfolio O. Calculate the weights of A and B (w_A and w_B) in the optimal risky portfolio O. Calculate the expected return and standard deviation of return for portfolio O. Calculate the Sharpe ratio of portfolio O.
Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is given: E(r_A)=10%,E(r_B)=12%,0_A=15%,o_B=20%, P_AB=0.4,r_f=2%. Denote the optimal risky portfolio investor can achieve with the highest Sharpe ratio by portfolio O. Calculate the weights of A and B (w_A and w_B) in the optimal risky portfolio O. Calculate the expected return and standard deviation of return for portfolio O. Calculate the Sharpe ratio of portfolio O.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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