2. A portfolio has an expected rate of return of 0.15 and a standard deviation of...
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2. A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U = E(r)-(A/2) s2. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset? 0.06 0.15-A/2(0.15)² 0.06 0.15-A/2(0.0225) -0.01125 A -0.09 A = 8 U=0.15-8/2(0.15)² = 6% 2. A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U = E(r)-(A/2) s2. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset? 0.06 0.15-A/2(0.15)² 0.06 0.15-A/2(0.0225) -0.01125 A -0.09 A = 8 U=0.15-8/2(0.15)² = 6%
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Related Book For
Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
Posted Date:
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