20. Look at the data in Table 6.8 on the average risk premium of the S&P 500 over T-bills, and the standard deviation of that risk premium. Suppose that the S&P 500 is your risky portfolio.

a. If your risk-aversion coefficient is A
4 and you believe that the entire 1926–2005 period is representative of future expected performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity?

b. What if you believe that the 1986–2005 period is representative?

c. What do you conclude upon comparing your answers to ( a ) and ( b )?