1. The market portfolio has an expected return of 15% and standard deviation of 22%. The riskfree rate is 7%. a) What is the optimal amount y* to invest in the market portfolio for an investor with risk aversion A=4? How about an investor with risk aversion A=1.1? b) For investors with A4 and A= 1.1, what are the expected rates of return of their complete portfolios E(r.)? What are the standard deviations of these complete portfolios σ.? What are the utility scores U. for both investors? c) If people borrow money at a higher rate r=9%, what type of investors is affected? What is the optimal amount to invest in the market portfolio for the investor with risk aversion A = 1.1 in this case? What do you learn? 1. The market portfolio has an expected return of 15% and standard deviation of 22%. The riskfree rate is 7%. a) What is the optimal amount y* to invest in the market portfolio for an investor with risk aversion A=4? How about an investor with risk aversion A=1.1? b) For investors with A4 and A= 1.1, what are the expected rates of return of their complete portfolios E(r.)? What are the standard deviations of these complete portfolios σ.? What are the utility scores U. for both investors? c) If people borrow money at a higher rate r=9%, what type of investors is affected? What is the optimal amount to invest in the market portfolio for the investor with risk aversion A = 1.1 in this case? What do you learn?
1. The market portfolio has an expected return of 15% and standard deviation of 22%. The riskfree rate is 7%. a) What is the optimal amount y* to invest in the market portfolio for an investor with risk aversion A=4? How about an investor with risk aversion A=1.1? b) For investors with A4 and A= 1.1, what are the expected rates of return of their complete portfolios E(r.)? What are the standard deviations of these complete portfolios σ.? What are the utility scores U. for both investors? c) If people borrow money at a higher rate r=9%, what type of investors is affected? What is the optimal amount to invest in the market portfolio for the investor with risk aversion A = 1.1 in this case? What do you learn? 1. The market portfolio has an expected return of 15% and standard deviation of 22%. The riskfree rate is 7%. a) What is the optimal amount y* to invest in the market portfolio for an investor with risk aversion A=4? How about an investor with risk aversion A=1.1? b) For investors with A4 and A= 1.1, what are the expected rates of return of their complete portfolios E(r.)? What are the standard deviations of these complete portfolios σ.? What are the utility scores U. for both investors? c) If people borrow money at a higher rate r=9%, what type of investors is affected? What is the optimal amount to invest in the market portfolio for the investor with risk aversion A = 1.1 in this case? What do you learn?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13QTD
Related questions
Question
Pls solve this and don't use ChatGPT. Thanks! Provide explanation as well ,thx.
Transcribed Image Text:1.
The market portfolio has an expected return of 15% and standard deviation
of 22%. The riskfree rate is 7%.
a) What is the optimal amount y* to invest in the market portfolio for an investor with
risk aversion A=4? How about an investor with risk aversion A=1.1?
b) For investors with A4 and A= 1.1, what are the expected rates of return of their
complete portfolios E(r.)? What are the standard deviations of these complete
portfolios σ.? What are the utility scores U. for both investors?
c) If people borrow money at a higher rate r=9%, what type of investors is affected?
What is the optimal amount to invest in the market portfolio for the investor with
risk aversion A = 1.1 in this case? What do you learn?
Transcribed Image Text:1.
The market portfolio has an expected return of 15% and standard deviation
of 22%. The riskfree rate is 7%.
a) What is the optimal amount y* to invest in the market portfolio for an investor with
risk aversion A=4? How about an investor with risk aversion A=1.1?
b) For investors with A4 and A= 1.1, what are the expected rates of return of their
complete portfolios E(r.)? What are the standard deviations of these complete
portfolios σ.? What are the utility scores U. for both investors?
c) If people borrow money at a higher rate r=9%, what type of investors is affected?
What is the optimal amount to invest in the market portfolio for the investor with
risk aversion A = 1.1 in this case? What do you learn?
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