An investor can design a risky portfolio based on two stocks, A and B. The standard deviation

of return on stock A is 25% while the standard deviation on stock B is 15%. The correlation

coefficient between the return on A and B is 0.40. What is the standard deviation of return on the minimum variance portfolio?

Using the data from problem 8, the expected return of stock A is 17% and the expected return of stock B is 8%. If the risk–free rate is 2.25%, what is the Sharpe ratio of the tangency portfolio formed by creating the optimal risky portfolio combining stocks A and B? Please note that the weights of the optimal risky portfolio will no longer be the same as the weights for the minimum variance portfolio. Note that the Sharpe Ratio is usually expressed as a decimal.