1. Answer the following 3 questions using this information:

   You are an investment adviser with different clients. You have the option to invest in a risky asset (A) that gives you 10% expected return with 15% risk (standard deviation). The return that you will receive by investing in US Treasury Bill is 4% without any risk.

   You have a client who wants to have an investment portfolio that gives her 7% expected return. Let's call it portfolio X. You create portfolio X by combining asset A and US T-Bill. What would be the risk (standard deviation) of portfolio X?

   		15%
   		7.5%
   		0
   		5%

If your client's risk aversion coefficient, A, is equal to 6 and her utility function is quadratic, how much utility does portfolio X give her?

		0.07
		0.065
		0.053
		0.058

Let's assume you combine risky asset A and risk-free US T-Bill, 30%-70%, and create a new portfolio, Y, for your client.

Compared to portfolio X, portfolio Y has:

		higher utility and same Sharpe ratio
		lower utility and same Sharpe ratio
		lower utility and lower Sharpe ratio
		higher utility and higher Sharpe ratio