What is the reward-to-volatility-ratio

Reference no: EM132178303

Question - John is interested in investing in the market stock portfolio and in the risk-free asset. The expected rate of return is 18% and STD is 28% for the market portfolio. He faces a risk free T-bill rate of 8%.

a. What is the reward-to-volatility-ratio (Sharpe ratio)?

b. If John's risk aversion is 3.5, how much he should invest in the market portfolio optimally?

c. What is the rate of return and STD of his optimum portfolio?

Reference no: EM132178303

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