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problem: An investor is holding a portfolio containing a risk free asset & a risky asset. The expected return on the portfolio is 10 percent, the risk-free rate is 3 percent, and the expected return on the risky asset is 17 percent.

[A] If the standard deviation of the portfolio (σP) is 8 percent, determine the standard deviation of the risky asset? Show your work.

[B] Based on your calculations in part A., estimate the Sharpe ratio? Interpret in words the meaning of the number you find.

[C] What proportion of the portfolio is invested in the risky asset?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M916866

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