Expected Standard Correlation Matrix Return Deviation US Stocks US Bonds US Stocks 6% 14%...
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Expected Standard Correlation Matrix Return Deviation US Stocks US Bonds US Stocks 6% 14% 1.00 US Bonds 3% 8% -0.25 1.00
a)
Felicia's coefficient of risk aversion is 10. How much of her portfolio should she allocate to the mutual fund, and how much to the risk-free asset?
Please round to the nearest whole number, use no decimal places, and include the percentage sign (for example, 50%).
b)
The Sharpe ratio of Sharon's portfolio is
The Sharpe ratio of Felicia's portfolio is
c Consider the data in Question 1 above. Suppose you lowered all returns by 100bp, so that the risk-free rate was 1.5%, the expected return on bonds was 2%, and the expected return on stocks was 5%.
-Your allocation to stocks would?
-Your allocation to bonds would
-Your allocation to the risk-free asset would
c
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