Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the pa roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 21% values are representative of investors' expectations for future performance and that the current T-bill rate is Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amour E(r) a minus sign. WBills 0.0 0.2 0.4 0.6 0.8 1.0 Windex 1.0 0.8 0.6 0.4 0.2 0.0 U(A = 2)
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the pa roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 21% values are representative of investors' expectations for future performance and that the current T-bill rate is Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amour E(r) a minus sign. WBills 0.0 0.2 0.4 0.6 0.8 1.0 Windex 1.0 0.8 0.6 0.4 0.2 0.0 U(A = 2)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged
roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 21% per year. Assume these
values are representative of investors' expectations for future performance and that the current T-bill rate is 2%.
Calculate the utility levels of each portfolio for an investor with A=2. Assume the utility function is U = E(r)
Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by
- 0.5 × Ag².
a minus sign.
WBills
0.0
0.2
0.4
0.6
0.8
1.0
WIndex
1.0
0.8
0.6
0.4
0.2
0.0
U(A = 2)
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