Repeat Problem 11 for an investor with A = 3. What do you conclude? Problem 11 Calculate

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Repeat Problem 11 for an investor with A = 3. What do you conclude?

Problem 11

Calculate the utility levels of each portfolio of Problem 10 for an investor with A = 2. What do you conclude?

Portfolio From Problem 10

W bills.............. W index

0 ..........................1.0

0.2........................ 0.8

0.4........................ 0.6

0.6 ........................0.4

0.8........................ 0.2

1.0.......................... 0

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 20% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Investments

ISBN: 978-0077861674

10th edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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