Compute the portfolio with the highest sharpe ratio

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Reference no: EM131849269

1. There exists two risky funds and a risk free asset. The first fund in mainly in stocks, and the second in bonds. The stock fund has an expected return of 10% and variance of 25%. The bond fund has an expected return of 6% and a variance of 15%. The correlation between the stock and bond funds is 0.1. The risk free rate is 4%. The agent is a mean-variance optimizer with coefficient A-15. What is the optimal fraction of their wealth to invest in each fund and the risk free asset? What is the Sharpe ratio of their portfolio?

2. There exists only two risky assets and a risk free rate r. Compute the portfolio with the highest Sharpe ratio.

Reference no: EM131849269

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