Use the following information for questions 1-3 : Portfolio Expected Return Stan
ID: 2621914 • Letter: U
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