Find the systematic standard deviation of sss

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Reference no: EM132951422

The closed-end fund SSS has a correlation of -0.8 with the market. The annualized expected return on the market is 17% and the annualized standard deviation of the market is 12%. The annualized standard deviation of SSS is 20% and the risk-free rate is 4% per year. Assume that the CAPM correctly prices all assets. For simplicity, we assume that SSS charges no management fee and has zero expenses.

1. Calculate the maximum Sharpe ratio you could earn with any portfolio.

2. If your coefficient of risk aversion is six, what portfolio should you hold? (Assume that you can trade in SRS, the market portfolio, and the risk-free asset).

3. Find the expected return of SSS. Interpret.

4. Find the systematic standard deviation of SSS.

Reference no: EM132951422

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