The one-month risk free rate is 04 risky asset a has a mean, Ask an Expert

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The one-month risk free rate is 0.4%. Risky asset A has a mean return of 1.50% a month and a standard deviation of 10%. Risky asset B has a mean return of 0.8% a month and a standard deviation of 5%. The correlation between the returns of A and B is 0.4. Use excel and form 11 portfolios of stocks A and B as follows: Portfolio 1 has weight of 1 on A and 0 on B. Portfolio 2 has weight of 0.9 on A and 0.1 on B. Etc. Portfolio 11 has weight of 0 on A and 1 on B. For each portfolio compute the expected return and standard deviation of its returns. What is the portfolio with the highest Sharpe ratio? Plot the returns and the standard deviations of each portfolio on a graph with expected returns on the y-axis and standard deviations on the x-axis.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91420377

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