Question: Why did I get it wrong? Please share your work. You estimate that a passive portfolio, that is, one invested in X a risky portfolio

Why did I get it wrong? Please share your work. You

Why did I get it wrong? Please share your work.

You estimate that a passive portfolio, that is, one invested in X a risky portfolio that mimics the S&P 500 stock index (passive portfolio), yields an expected rate of return of 13% with a standard deviation of 25%. You manage an active portfolio with expected return 18% and standard deviation 28%. The risk-free rate is 8%. Consider that your client's degree of risk aversion (A) is equal to 3.5. If he chooses to form his complete portfolio by investing in the passive portfolio and risk free asset, what proportion, y*, would he select? Please round your answer to the fourth decimal: 0.0000 Selected Answer: 0.3644

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