Use the following statistics for this problem (amr=arithmetic mean return, gmr=geometric mean return, s=standard deviation of return):

amr_HSI	gmr_HSI
0.2729%	0.0882%
	s_r_HSI
	0.060477

a) Your father argues that he can make more money if he borrows money to invest in the HSI at a margin of 50%. Your fathers utility function is UF = E(r) AF2 , where AF (risk aversion factor) = 2. Assume he can borrow at an interest rate of 0.5% per month. Also assume that he will not face any margin calls. Given your estimates from the historical returns, explain to him whether buying the HSI on a 50% margin or investing in the HSI without borrowing is a better strategy based on his utility function.

b) Can we conclude from the calculation in part (a) that all risk-averse investors would make the same choice (50% margin or no margin)?