Your coefficient of risk aversion is 2.5. You invest $1,500 in your optimal complete portfolio....
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Your coefficient of risk aversion is 2.5. You invest $1,500 in your optimal complete portfolio. The optimal complete portfolio is composed of the optimal risky portfolio and the T-bills. The optimal risky portfolio has an expected rate of return of 18% and a standard deviation of 25% and the Treasury bills have a rate of return of 7%. Which of the following statements is (are) true? Statement 1: The optimal complete portfolio has higher Sharpe ratio than any other portfolio that is not the optimal complete portfolio. Statement 2: The optimal complete portfolio is on a higher indifference curve than any other portfolio that is not the optimal complete portfolio. Statement 3: The optimal complete portfolio has higher expected return than the optimal risky portfolio. Statement 4: There are many portfolios that have a Sharpe ratio as high as the optimal complete portfolio. Statements 1 and 3 1 Statements 2 and 4 Statement 3 Statement 4 Statement 1 Statement 2
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