PRACTICE PROBLEM: Suppose a stock fund has an expected return of 12% and standard deviation of 20%. The T-bill rate is 6%, while the borrowing rate faced an investor is 8%. if investor's coefficient of risk aversion, A, is 1.25, what is his y*, the optimal proportion to be invested in the risky stock fund? Plot the location of the optimal portfolio on CAL. y [E(r)-r,] Ao

RACTICE PROBLEM: Suppose a stock fund has an expected return of 12% and standard deviation of 20%. The T-bill rate is 6%, while the borrowing rate faced an investor is 8%. - if investor's coefficient of risk aversion, A, is 1.25 , what is his y, the optimal proportion to be invested in the risky stock fund? Plot the location of the optimal portfolio on CAL. y=Ap2[E(rp)rf]