Business
Business, 18.05.2021 19:20, kaiyerecampbell95

You are looking to invest in the US capital market. There are 3 assets you are considering building your portfolio out of: VTI (risky corporate stocks), VCIT (risky corporate debt), and 3-month T-bills of the US government. VTI has an annual expected return of 8%, and a volatility of 15%. VCIT has an annual expected return of 3.5%, and a volatility of 5%. The covariance between VTI and VCIT is 0.002. The T-bills of the US government have an expected return of 2.5%, and have no volatility. What is the expected return of a risky portfolio made of 30% VTI, and 70% VCIT? What is the Volatility of the portfolio? What is the Sharpe ratio of the portfolio? Which is closer to the optimal risky portfolio: A portfolio with the initial 30/70 weighting, or a 50/50 weighting? Please show all work. You will not recieve credit for a single correct answer with no work, but partial credit will be given even if your answer is completely wrong as long as I can understand your work.

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