The following information refers to parts a-c. Consider two utility maximising investors, A and B, whose...
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The following information refers to parts a-c. Consider two utility maximising investors, A and B, whose preferences are described as EU; = e₁ = 1 s ²/₁₂, ер - ti where ep portfolio, sp denotes the standard deviation of returns, Sp and t; is investors' risk tolerance, i = A, B. Suppose that the optimal portfolio for investor A has an expected return of 12 percent and standard deviation of return of 12.8 percent and that the optimal portfolio for investor B has an expected return of 7 percent and standard deviation of return of 4.8 percent. The market portfolio has an expected rate of return of 10 percent. denotes expected return on the investors' a) To construct the optimal portfolio mentioned above, investor A: b) The Sharpe ratio for any portfolio on the capital allocation line is: c) Regarding the risk tolerance parameter t;, which of the following is correct: The following information refers to parts a-c. Consider two utility maximising investors, A and B, whose preferences are described as EU; = e₁ = 1 s ²/₁₂, ер - ti where ep portfolio, sp denotes the standard deviation of returns, Sp and t; is investors' risk tolerance, i = A, B. Suppose that the optimal portfolio for investor A has an expected return of 12 percent and standard deviation of return of 12.8 percent and that the optimal portfolio for investor B has an expected return of 7 percent and standard deviation of return of 4.8 percent. The market portfolio has an expected rate of return of 10 percent. denotes expected return on the investors' a) To construct the optimal portfolio mentioned above, investor A: b) The Sharpe ratio for any portfolio on the capital allocation line is: c) Regarding the risk tolerance parameter t;, which of the following is correct:
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