Suppose that your preferences are captured by a mean-variance utility function, with a risk aversion coefficient  a= 0:7. If given a choice to invest the entire amount of $100,000 in a single project, which would you choose: project XX, project Y Y , or a risk-free project, F, that yields a rate of return of rF = 3.5%?

You are given an additional $100; 000 to invest. How do you allocate it between your original portfolio, W, and the risk-free project, F?

 

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You are a portfolio manager with $100,000 to invest. Today (at date t) there are two opportunities to invest, both yielding a stochastic payoff depending the state of the world to be realized next month (at date t + 1). In particular, the economy will continue on an upward trajectory with probability 40%, or will turn into recession with probability 60%. For each dollar invested in a project, the distribution of the project's payoffs is given as follows. 1 XX Pu=0.4 Pa 0.6 1.55 0.75 YY Pu=0.4 Pd 0.6 1.3 0.9 Suppose that you hold a portfolio W with $30, 000 invested in project XX, and $70,000 invested in project YY. You are a portfolio manager with $100,000 to invest. Today (at date t) there are two opportunities to invest, both yielding a stochastic payoff depending the state of the world to be realized next month (at date t + 1). In particular, the economy will continue on an upward trajectory with probability 40%, or will turn into recession with probability 60%. For each dollar invested in a project, the distribution of the project's payoffs is given as follows. 1 XX Pu=0.4 Pa 0.6 1.55 0.75 YY Pu=0.4 Pd 0.6 1.3 0.9 Suppose that you hold a portfolio W with $30, 000 invested in project XX, and $70,000 invested in project YY.

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I dont have personal preferences or the ability to invest money However I can provide some guidance based on the meanvariance utility function and ris... View the full answer