Assume that the expected return of risky asset A is 10% with a standard deviation of...
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Assume that the expected return of risky asset A is 10% with a standard deviation of 15%, and the expected return of risky asset B is 25% with a standard deviation of 30%. The correlation between the returns of A and B is zero. Assume that the lending rate is 1% and the borrowing rate is 5%. You are a financial advisor, and one of your clients asked you to form an optimized portfolio for her. Assume that your client's degree of risk aversion is equal to 5, and that her utility function is given by U=E(r)-(A/2)02. What is the composition of the optimal portfolio for your client? O a. 80% in asset A, 53.33% in asset B, and 33.33% of borrowing at 1% O b. 60% in asset A, 40% in asset B, without borrowing or lending c. 53.33% in asset A, 46.67% in asset B, without borrowing or lending O d. 43.5% in asset A, 43.5% in asset B, and 13% of lending at 5% Assume that the expected return of risky asset A is 10% with a standard deviation of 15%, and the expected return of risky asset B is 25% with a standard deviation of 30%. The correlation between the returns of A and B is zero. Assume that the lending rate is 1% and the borrowing rate is 5%. You are a financial advisor, and one of your clients asked you to form an optimized portfolio for her. Assume that your client's degree of risk aversion is equal to 5, and that her utility function is given by U=E(r)-(A/2)02. What is the composition of the optimal portfolio for your client? O a. 80% in asset A, 53.33% in asset B, and 33.33% of borrowing at 1% O b. 60% in asset A, 40% in asset B, without borrowing or lending c. 53.33% in asset A, 46.67% in asset B, without borrowing or lending O d. 43.5% in asset A, 43.5% in asset B, and 13% of lending at 5%
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