1. Consider the following variation of the problem analyzed in the first tutorial. The investor has...
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1. Consider the following variation of the problem analyzed in the first tutorial. The investor has mean- variance preferences: U(W) = aE [W] 6V [W]. Suppose that she has access to three assets: a diversified portfolio of stocks with return R, (stocks), a diversified real-estate fund with return R (housing), and risk-free bond/borrowing at rate R., (risk-free bond). If the investor invests B in risk-free bonds and a fraction of her risky portfolio in stocks (and the remaining fraction 1-2 in housing), then her future wealth equals W = (I-B)(zR, + (1-x)R,) + BRj. (a) Compute the expected value and the variance of W. Hint: Recall that V[aX+BY] =a²V [X] +82V Y + 2aBCov(X, Y). 1. Consider the following variation of the problem analyzed in the first tutorial. The investor has mean- variance preferences: U(W) = aE [W] 6V [W]. Suppose that she has access to three assets: a diversified portfolio of stocks with return R, (stocks), a diversified real-estate fund with return R (housing), and risk-free bond/borrowing at rate R., (risk-free bond). If the investor invests B in risk-free bonds and a fraction of her risky portfolio in stocks (and the remaining fraction 1-2 in housing), then her future wealth equals W = (I-B)(zR, + (1-x)R,) + BRj. (a) Compute the expected value and the variance of W. Hint: Recall that V[aX+BY] =a²V [X] +82V Y + 2aBCov(X, Y).
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Fundamentals Of Electric Circuits
ISBN: 9780073301150
3rd Edition
Authors: Matthew Sadiku, Charles Alexander
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