Question: 3. (6 points) The lending rate is 5% the borrowing rate is 8%. The risk aversion level is 4. The expected rate of return of

3. (6 points) The lending rate is 5% the borrowing rate

3. (6 points) The lending rate is 5% the borrowing rate is 8%. The risk aversion level is 4. The expected rate of return of the optimum risky asset if 20% and the standard deviation is 20%. What is the optimum asset allocation? How much (in percentage) should you invest in the risky asset and how much in the riskfree asset

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