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What is the sharpe ratio of your current investment

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Reference no: EM132433960

Problem: Suppose that you currently have $250,000 invested in a portfolio with an expected return of 12% and a volatility of 10%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 12%. The risk-free rate of interest is 5%.

Required:

a. What is the Sharpe ratio of your current investment? What is the Sharpe ratio of the efficient portfolio? What can you say about your investment based on the ratios?

b. Suppose that you want to maximize your expected return without increasing your risk. How can you achieve this goal?

c. Without increasing your risk beyond the current 10%, what is the maximum expected return you can expect?

Reference no: EM132433960

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