Assume that {r_f}=0.04, E({R_m})=0.20, and {{σ }_{m}}=0.2, where m denotes the tangency (or ma
Question: Assume that \({{r}_{f}}=0.04\), \(E\left( {{R}_{m}} \right)=0.20\), and \({{\sigma }_{m}}=0.2\), where m denotes the tangency (or market) portfolio. Suppose that an investor's preferences are given by
\[U=E\left( {{R}_{p}} \right)-4\sigma _{p}^{2}\]where p denotes the investor's portfolio choice which combines proportion w of the
market portfolio and proportion 1-w of the risk-free asset. Note that the slope of the
investor's indifference curves is 8 \({{\sigma }_{p}}\)
A. Solve for the investor's optimal expected return and risk on her portfolio.
B. What proportion of wealth does she hold in the market portfolio?
Price: $2.99
Solution: The solution consists of 2 pages
Type of Deliverable: Word Document
Type of Deliverable: Word Document
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