One of your clients has changed his risk aversion degree A from a low level (A=3) to a high level (A=4), with utility score function. Based on your market view (Volatile), if the interest rate is to be adjusted from 4.0% per year to 8.0% per year, 

Complete the client's optimal portfolio using the risk-free asset of 6%, Beta = 1, Std Deviation = 20% and market return = 10%. 

Transcribed Image Text:

u(µ, o) = µ - 1 - Ασ 2 u(µ, o) = µ - 1 - Ασ 2

Answer rating: 100% (QA)

Answer To determine the clients optimal portfolio we can use the Capital Asset Pricing Model CAPM along with the clients utility score function Given information Risk aversion degree A low level A3 hi... View the full answer