You know the following information:
| Venetian Co. | LondonInv Inc. | rF (T-bill) | |
| E(ret) | 0.07 | 0.19 | 0.02 |
| σ | 0.4 | 0.3 |
The two assets' covariance is -0.024. How much do you have to invest in Venetian Co. if you want to maximize your Sharpe ratio?
Provide your answer in percent, rounded to two decimals, omitting the % sign.
Hint: You are looking for the weights in the ORP.
Solution :- Sharpe ratio of investing in Venetian company = (Expected return - Risk free return) / Standard deviation.
= (0.07 - 0.02) / 0.40
= 0.05 / 0.40
= 0.125 i.e, 12.50 % (0.125 * 100)
Conclusion :- % of investment in Venetian Co. will be 12.50 %.
You know the following information: Venetian Co. LondonInv Inc. rF (T-bill) E(ret) 0.07 0.19 0.02 σ...