For an investor who has the following utility function U = -0.5*3*variance of portfolio returns, there is a risky portfolio with an expected return of 0.07 expected return of portfolio and a variance of 0.55. The risk-free rate is 0.02 and the investor can borrow or lend at this rate for unlimited amount of money. Please determine the final portfolio weight for the optimal risky portfolio for this investor. a. The optimal portfolio weight for this investor is 0.03 O b. The optimal portfolio weight for this investor is 0.09 O c. The optimal portfolio weight for this investor is 0.02 O d. The optimal portfolio weight for this investor is 0.05
For an investor who has the following utility function U = -0.5*3*variance of portfolio returns, there is a risky portfolio with an expected return of 0.07 expected return of portfolio and a variance of 0.55. The risk-free rate is 0.02 and the investor can borrow or lend at this rate for unlimited amount of money. Please determine the final portfolio weight for the optimal risky portfolio for this investor. a. The optimal portfolio weight for this investor is 0.03 O b. The optimal portfolio weight for this investor is 0.09 O c. The optimal portfolio weight for this investor is 0.02 O d. The optimal portfolio weight for this investor is 0.05
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
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Transcribed Image Text:For an investor who has the following utility function U expected return of portfolio
-0.5*3*variance of portfolio returns, there is a risky portfolio with an expected return of 0.07
%3D
and a variance of 0.55. The risk-free rate is 0.02 and the investor can borrow or lend at this
rate for unlimited amount of money. Please determine the final portfolio weight for the
optimal risky portfolio for this investor.
O a. The optimal portfolio weight for this investor is 0.03
O b. The optimal portfolio weight for this investor is 0.09
O . The optimal portfolio weight for this investor is 0.02
O d. The optimal portfolio weight for this investor is 0.05
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