Question: An investor has the utility function: U(e(r), (r)) = E(r) - 0,5- (r) He can invest in the risk free asset, which returns 5%,

An investor has the utility function: U(e(r), (r)) = E(r) - 0,5- (r) He can invest in the risk free asset, which returns 5%, and an index fund, which returns 8% in expectation, with a variance of 0,04. What is the optimal weight of each of these two assets in his portfolio?

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