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As the chief investment officer for a money management firm specializing in taxable individual investors, you are trying to establish a strategic asset allocation for
As the chief investment officer for a money management firm specializing in taxable individual investors, you are trying to establish a strategic asset allocation for two different clients. You have established that Ms A has a risktolerance factor of while Mr B has a risktolerance factor of The characteristics for four model portfolios follow:
ASSET MIX
Portfolio Stock Bond ER sigma
Calculate the expected utility of each prospective portfolio for each of the two clients. Do not round intermediate calculations. Round your answers to two decimal places.
Portfolio Ms A Mr B
Which portfolio represents the optimal strategic allocation for Ms A Which portfolio is optimal for Mr B
Portfolio
Select
represents the optimal strategic allocation for Ms A Portfolio
Select
is the optimal allocation for Mr B
For Ms A what level of risk tolerance would leave her indifferent between having Portfolio or Portfolio as her strategic allocation? Round your answer to the nearest whole number.
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