You are managing an equal-weighted portfolio of stocks 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)
b. Market excess return
c. The Sharpe ratio

Question

You are managing an equal-weighted portfolio of stocks 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)
b.	Market excess return 
c.	The Sharpe ratio