Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 13 percent and 16 percent,
respectively. The standard deviations of the assets are 39 percent and 47 percent, respectively. The correlation between the two
assets is 61 and the risk-free rate is 5.3 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest
expected loss for this portfolio over the coming year with a probability of 1 percent? (A negative value should be indicated by a minus
sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3
decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.)
Sharpe ratio
Smallest expected loss
%
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