Use the following information for questions 1-3 : Portfolio Expected Return Stan

Question

Use the following information for questions 1-3:

Portfolio          Expected Return         Standard Deviation     Correlation with Market

A                                 15%                             29%                             .8

B                                 9%                               17%                             .4

C                                 12%                             27%                             .7

D                                 10%                             21%                             .5

E                                  14%                             36%                             .6

Market                        11%                             18%                             1

Risk Free                     5%                               0%                               0

1. Approximately what percentage of Portfolio E

Explanation / Answer

a) Z = ( X - Xbar) / stdev = ( 14 - 25) / 0.18 = - 0.62

so it gives approx 22.91 %

b) use capm model

0.1 = 0.05 + beta ( 0.11 - 0.05 )

beta = 0.84

c) sharpe ratio = ( 0.15 - 0.05) / 0.29 = 0.345

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