1. Consider the following information about a risky portfolio that you manage, and a risk-free

asset: Expected return= 15%, standard deviation = 20%, r f =5%.

i) Your client wants to invest a proportion of her total investment budget in your

risky fund. What proportion should she invest in the risky portfolio, P, and what

proportion in the risk-free asset if level of risk aversion, A is 3.5? (2)

ii) What will be the standard deviation of the rate of return on her portfolio?

(2)

iii) What is the reward to volatility ratio of your portfolio? (2)

iv) If you were a risk neutral person then what is your utility score from the

risky portfolio?