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The universe of available securities includes two risky stock funds, A and B and T-Bills. The data for the universe

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The universe of available securities includes two risky stock funds, A and B and T-Bills. The data for the universe are as follows:

The correlation coefficient between funds A and B is -0.2

Consider an investor with the utility

U=E(R_{X})-2.5sigma _{X}^{2}

a) How much will an investor invest in funds A and B and in the T-Bills?

Transcribed Image Text:

A B T-Bills Expected Return 10% 30% 5% Standard Deviation 20% 60% 0% U = E(Rx) - 2.50

Expert Answer:

Answer rating: 100% (QA)

Wa b a b 60 60 20 0 75 Wb 0 25 ER 10 0 View the full answer


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Related Book For  answer-question
Financial Accounting A User Perspective

Financial Accounting A User Perspective

ISBN: 978-0470676608

6th Canadian Edition

Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry

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Posted Date: November 22, 2019 11:09:59
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