Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Chapter 26, Problem 7P
Summary Introduction

To calculate: The value of option using Black Scholes model.

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Question 5. You can invest in two risky assets, rị and r, and one risk-free asset, rf . The two risky assets are uncorrelated, and values are E[r] = 8%, E[r2] = 6%, Var[r] = 10%,Var[r2] = 3%, and rf = 3% If you have a mean-variance optimizer with a risk aversion A = 2, what is the optimal portfolio?
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