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What is the sharpe ratio of the risky portfolio

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You manage a risky portfolio with an expected return of 12% and a standard deviation of 24%. Assume that you can invest and borrow at a risk-free rate of 3%, using T-bills.

a) Draw the Capital Allocation Line (CAL) for this combination of risky portfolio and risk-free asset. What is the Sharpe ratio of the risky portfolio?

b) Your client chooses to invest 50% of their funds into your risky portfolio and 50% risk-free. What is the expected return and standard deviation of the rate of return on their portfolio?

Reference no: EM132799604

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