Do you guys think when people ask for this stuff if it’s usually stated in terms of equity or assets or both are acceptable? Work in the hf world and we generally state in terms of equity
Indeed
I concur with this.
+2
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The trick was to fool you into subtracting 1 from the weight I remember lol
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Why would you subtract the w by 1 if you solved for the w as the Rfr variable, which should be negative in itself.
You didn’t need to use the Sharpe method, weights were fine, and you don’t input SDs.
It is the portfolio with the largest Sharpe ratio.
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If borrowing is not allowed and you’re required return is greater than the expected return of the corner portfolio with the highest sharpe ratio, you need to find the two corner portfolios that “sandwich” the required return. You will be somewhere along the mean variance frontier (and above the global minimum).
However, if borrowing is allowed and, for argument sake, the required return is actually below the expected return offered by the corner portfolio with the highest sharpe ratio, then the optimum portfolio will be some combination of the risk free rate and the corner portfolio with the highest sharpe ratio. The optimal portfolio will be somewhere along the CAL.
Similarly, if borrowing is still allowed but the required return is greater than the expected return of the corner portfolio with the highest sharpe, you would borrow against the risk free rate and invest more in the aforementioned corner portfolio (highest sharpe portfolio). You will still be on the CAL though but the line will simply extend further to the right past the tangent point at the same slope.
Not sure if that’s right but that is my current understanding.
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be smart gents, you end up passing, and then you get your charter revoked for being impatient.
You also missed the part on ethics too? You’re not supposed to talk about questions on the exam.
oh shit thanks for the economic input hei.so
Bless you
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