Suppose the consumer has a Mean-Variance utility, u(ra, 0₂) = −(9% — rz)² – o², and there are a risk-free asset with return rf = 5% and a risky asset with expected return T'm = 9% and standard deviation om = 4%. If x is the fraction of income invested in the risky asset m so that the consumer problem is max_u(rz, O₂) = −(9% – rz)² - 0²/ subject to r₂ = (1-x) × 5% + x x 9% σ₂ = x x 4%, answer the following questions tion 6 (a) In the consolidated budget constraint, the relative "price" of -o to r, is Tm-Tf στην A. B. Tm1=2 vom = 1 C. Tm= 2.25 om D. rm -rf = 4%.

Suppose the consumer has a Mean-Variance utility, u(ra, 0₂) = −(9% — rz)² – o², and there are a risk-free asset with return rf = 5% and a risky asset with expected return T'm = 9% and standard deviation om = 4%. If x is the fraction of income invested in the risky asset m so that the consumer problem is max_u(rz, O₂) = −(9% – rz)² - 0²/ subject to r₂ = (1-x) × 5% + x x 9% σ₂ = x x 4%, answer the following questions tion 6 (a) In the consolidated budget constraint, the relative "price" of -o to r, is Tm-Tf στην A. B. Tm1=2 vom = 1 C. Tm= 2.25 om D. rm -rf = 4%.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 6P

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