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A portfolio has an expected rate of return of 14% and a standard deviation of 22%. The risk-free rate is 4%. An investor has the following utility function:. U = E(r)-1/2(A)σ2 Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset?

An investor has the utility function listed in problem 3 and is considering investing in the risky asset and risk–free asset from problem 1.

Y* =(E(Rp) -rf)/((A)(Variance of p))

If the investor’s coefficient of risk aversion constant A is 2.0, what is their optimal portfolio weight to invest in the risky asset?

Using the information from problem 4, what is the investor from problem 4’s expected return on their optimal complete portfolio?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91726018

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