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  3. (5 points) assume we have a simple portfolio of tw

(5 points) Assume we have a simple portfolio of two mutual funds, one invested in...

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Finance

(5 points) Assume we have a simple portfolio of two mutual funds, one invested in bonds and the other invested in stocks. Lets further assume that stock annual mean and variance are 5% and 8%, respectively. The bond annual mean and variance are 2% and 6%, respectively. Our allocation is 60% in stock and 40% in the bond. Compute the portfolio Sharpe Ratio. Assume the covariance between the stock and the bond is 2%. Use rf = 0.08%.

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