Question: This question assumes the standard mean-variance utility function. You are investing in the S&P500 index, along with U.S. Treasury bills. Your risk-aversion is 7.

This question assumes the standard mean-variance utility function. You are investing in the S&P500 index, along with U.S. Treasury bills. Your risk-aversion is 7. Treasury bills will earn you a return of 5.40%, with no risk associated with them. The S&P500 has volatility 30.70%, but earns a more attractive expected return of 7.90%. What percentage of your wealth should you allocate to Treasury bills?

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