1.Your client holds 125% of her wealth in an index fund that tracks the S&P 500, which has expected return & risk of 11% & 21% respectively. The risk-free rate = 3.2%. What is the client's risk aversion?

2.As stated in Problem #1 above, the client holds 125% of her wealth in the S&P 500 index fund. Explain how that can be accomplished. What is the client's allocation to T-Bills?

3.A risky investment has a 15% expected return & 25% volatility. The risk-free rate is 4%. At what risk aversion coefficient (A) would the investor be indifferent between the risky investment and T-Bills?

4.Stocks have outperformed T-Bills by about 7% per year over the past 95+ years. Use utility theory to explain why an investor might want to investment in T-Bills.