This question assumes the standard mean-variance utility function. You are allocating your investments between a the NZX50 and a holding of (New Zealand) T-bills. The expected return on the NZX50 is 7.50%, with volatility 12.80%. In contrast, there is no risk investing in T-bills, and they will earn you a return of 4.70%. Your risk-aversion is 7. What percentage of your wealth should you allocate to Treasury bills? 34.61% 96.88% 96.51% 75.59%
This question assumes the standard mean-variance utility function. You are allocating your investments between a the NZX50 and a holding of (New Zealand) T-bills. The expected return on the NZX50 is 7.50%, with volatility 12.80%. In contrast, there is no risk investing in T-bills, and they will earn you a return of 4.70%. Your risk-aversion is 7. What percentage of your wealth should you allocate to Treasury bills? 34.61% 96.88% 96.51% 75.59%
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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This question assumes the standard mean-variance utility function. You are allocating your investments between a the NZX50 and a holding of (New Zealand) T-bills. The expected return on the NZX50 is 7.50%, with volatility 12.80%. In contrast, there is no risk investing in T-bills, and they will earn you a return of 4.70%. Your risk-aversion is 7. What percentage of your wealth should you allocate to Treasury bills?
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34.61% |
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96.88% |
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96.51% |
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75.59% |
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