2. Portfolio Choice Assume that r, =.04, E(Rm)=.12, and om = .25 where m denotes the tangency (or market) portfolio. Suppose that an investor's preferences are given by U = E(R)-0, of the where p denotes the investor's portfolio choice which combines proportion market portfolio and proportion 1- w of the risk-free asset. A. Is this investor risk loving or risk averse? Please explain your reasoning. B. If the investor wants to maximize utility by allocating her wealth between the market portfolio and the risk-free asset, what proportion of wealth should she hold in the risk- free asset (1-w)? What is the risk and expected return of this utility-maximizing portfolio? Please explain your answers and illustrate graphically, being careful to label all axes