Question: Based on 1926-2015 data, suppose that expectations for the U.S. equity market and the T-bill rate are as follows, respectively: 11.77 % and 3.47 %.

Based on 1926-2015 data, suppose that expectations for the U.S. equity market and the T-bill rate are as follows, respectively: 11.77 % and 3.47 %. Standard deviation of the U.S. equity market is 20.59 %. Based on high risk tolerance, calculate the optimal allocation of risky and risk-free assets. In other words, how much do you invest into T-bill and how much into the U.S. equity market based on a high risk tolerance?

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