2. Consider a standard portfolio choice problem with two risky assets: equity and risky bond. Their expected returns, standard deviations, and the correlation co- efficient are given by E(r) 0 p(corr) bond equity 8% 13% 12% 20% 0.3 a) Suppose the risk-free interest rate is 5%, find the tangency portfolio. b) Given the 5% risk-free interest rate and the utility function of an investor E(rc)-0.005Ao, where A = 5, 1 what are the investor's optimal portfolio weights on the equity and risky bond? c) Suppose the risk-free interest rate is 6%, find the tangency portfolio. d) Suppose the risk-free saving rate is 5% and the risk-free borrowing rate is 6%. Find the optimal portfolio weights of equity, risky bond, and safe asset for an investor with A = 2.

Consider a standard portfolio choice problem with two risky assets: equity and risky bond. Their expected retums, standard deviations, and the correlation efficient are given by a) Suppose the risk-free interest rate is 5%, find the tangency portfolio. b) Given the 5% risk-free interest rate and the utility flunction of an investor E(rc)0.005Ac2,whereA=5, 1 what are the investor's optimal portfolio weights on the equity and risky bond? c) Suppose the risk-free interest rate is 6%, find the tangency portfolio. d) Suppose the risk-free saving rate is 5% and the risk-free borrowing rate is 6%. Find the optimal portfolio weights of equity, risky bond, and safe asset for an investor with A=2. Consider a standard portfolio choice problem with two risky assets: equity and risky bond. Their expected returns, standard deviations, and the correlation efficient are given by a) Suppose the risk-free interest rate is 5%, find the tangency portfolio. b) Given the 5% risk-free interest rate and the utility flunction of an investor E(rc)0.005Ac2,whereA=5, 1 what are the investor's optimal portfolio weights on the equity and risky bond? c) Suppose the risk-free interest rate is 6%, find the tangency portfolio. d) Suppose the risk-free saving rate is 5% and the risk-free borrowing rate is 6%. Find the optimal portfolio weights of equity, risky bond, and safe asset for an investor with A=2