You wish to invest in a portfolio of stocks A and B. The risk free rate...
You wish to invest in a portfolio of stocks A and B. The risk free rate is 4%.
A B
Expected return (%) 10 20
Volatility (%) 15 22
Correlation between returns 0.3
Complete the following table for each portfolio
Which portfolio has the highest reward to risk (with risk measured as volatility)?
|
Portfolio |
% in A |
Expected Return |
Standard Deviation of Return |
Sharpe Ratio |
|
1 |
30% |
|||
|
2 |
40% |
|||
|
3 |
50% |
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