Finance The annual risk free rate is 0.03. We have the following information about three riskyassets (on an annual basis).Asset 1 Asset 2 Asset 3Expected return 0.09 0.060.12Standard deviation 0.13 0.17 0.19The correlation matrix of the three assets is:Asset 1 Asset 2 Asset 30.700.41-0.2-0.21Asset 1 1Asset 2 0.70Asset 3 0.4Calculate 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.)

Portfolio sharp ratio is calculated as shown below. Sharp ratio=Portfolio expected return-Risk free…

Answered: The annual risk free rate is 0.03. We…

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

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

Problem 1PS

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Question

Finance

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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