Your clients degree of risk aversion is A = 3.5. a. What proportion, y, of the total

Question:

Your client’s degree of risk aversion is A = 3.5.

a. What proportion, y, of the total investment should be invested in your fund?

b. What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio?

You manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...