Question: Suppose Microsoft has mean 7% and standard deviation 10%, and GameStop has mean 23%. The risk-free rate is 5%. Alice and Bob have mean-variance utility.

Suppose Microsoft has mean 7% and standard deviation 10%, and GameStop

Suppose Microsoft has mean 7% and standard deviation 10%, and GameStop has mean 23%. The risk-free rate is 5%. Alice and Bob have mean-variance utility. A. Alice is indifferent between Microsoft, GameStop, and the risk-free asset. What is the standard deviation of GameStop? Hint: first compute Alice's risk aversion. (Answer the closest integer e.g. 15%) B. Alice's optimal portfolio has mean 17.5% and standard deviation 20%. Bob's optimal portfolio has standard deviation 24%. What is the expected return on Bob's optimal portfolio? (Answer an integer, e.g. 14%) C. Whose indifference curve is flatter at the tangency portfolio? a. Alice b. Bob c. Their indifference curves must have the same slope at the tangency portfolio d. Impossible to say

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