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You want to build a complete portfolio of a risk-free asset (e.g. treasury bills) and...

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Finance

You want to build a complete portfolio of a risk-free asset (e.g. treasury bills) and a risky asset (e.g. a stock). You have $10,000 cash in hand to invest. The rate of return of the risk-free asset is 4%. The expected rate of return of the risky asset is 10% and its standard deviation is 15%. (Keep two decimal places for your answers, e.g., 0.66)

(1) If you invest $3,000 on the risky asset. What is the Sharpe ratio of your complete portfolio?

(2) If you invest $12,000 on the risky asset by borrowing at an interest rate of 7%. What is the Sharpe ratio of your complete portfolio?

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