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The annual risk free rate is 0.03. We have the followin assets (on an annual basis). Expected return Asset 1 Asset 2 Asset 3 0.09 0.06 0.12

The annual risk free rate is 0.03. We have the followin assets (on an annual basis). Expected return Asset 1 Asset 2 Asset 3 0.09 0.06 0.12

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The annual risk free rate is 0.03. We have the following information about three risky assets (on an annual basis). Asset 1 Asset 2 Asset 3 Expected return 0.09 0.06 0.12 Standard deviation 0.13 0.17 0.19 The correlation matrix of the three assets is: Asset 1 Asset 2 Asset 3 0.70 0.4 1 -0.2 -0.2 1 Asset 1 1 Asset 2 0.70 Asset 3 0.4 Calculate the expected return of the portfolio that maximises the Sharpe ratio. (Please provide the answer in decimal form to an accuracy of 4 decimal places.)
Transcribed Image Text:The annual risk free rate is 0.03. We have the following information about three risky assets (on an annual basis). Asset 1 Asset 2 Asset 3 Expected return 0.09 0.06 0.12 Standard deviation 0.13 0.17 0.19 The correlation matrix of the three assets is: Asset 1 Asset 2 Asset 3 0.70 0.4 1 -0.2 -0.2 1 Asset 1 1 Asset 2 0.70 Asset 3 0.4 Calculate the expected return of the portfolio that maximises the Sharpe ratio. (Please provide the answer in decimal form to an accuracy of 4 decimal places.)
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