Question: 6 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

6 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 24% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 3%. Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is u = E(F) - 0.5 202. (Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign ) WB U( A2) 0.0 02 0.4 0.6 0.8 Windex 10 0.8 06 0.4 0.2 0.0 1.0

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