Question: A variance-averse investor has a utility function U(, var) = 0.25*SD^2, where is the portfolio expected return and SD is portfolio standard deviation. The risk-free

A variance-averse investor has a utility function U(, var) = 0.25*SD^2, where is the portfolio expected return and SD is portfolio standard deviation. The risk-free rate of return is 3%, the average return on the market index is 16%, and the standard deviation of the market index is 68%. Derive a formula for the optimal weight to be placed on the market and solve for it in this case. What risk-aversion coefficient would justify an optimal investment consisting of only 1% of funds being placed in the market index

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