You are constructing a portfolio of two assets asset a and


You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 14 percent and 17 percent, respectively. The standard deviations of the assets are 40 percent and 48 percent, respectively. The correlation between the two assets is .63 and the risk-free rate is 4.3 percent. What is the optimal Sharpe ratio in a portfolio of the two assets (round to 4 decimal places)? What is the smallest expected loss for this portfolio over the coming year with a probability of 16 percent (round to 2 decimal places)?

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Financial Management: You are constructing a portfolio of two assets asset a and
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