Expected market portfolio return

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You are managing an equal-weighted portfolio of stocks (A&B) on behalf of your company's treasury. Assume that stock A and stock B are two risky assets. C is a risk-free asset. The details of these stocks are below:

Stock A
Stock B
C (Risk-free asset rf)
Average return
7.00%
15.00%
2.00%
Variance of return
0.0064
0.0196
Sigma of return
8.00%
14.00%
Covariance of returns
0.0011

Required

Using the information in the above stated table calculate the following:

a. Expected market portfolio return, E (RM) and the market excess return.

b. The Sharpe ratio

Reference no: EM132554856

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