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Asset Expected return Standard deviation DullCo equity 0.06 0.094 ExcitingCo equity 0.19 0.24 Riskless debt 0.02 NA The covariance between the returns on SafeCo equity

Asset

Expected return

Standard deviation

DullCo equity

0.06

0.094

ExcitingCo equity

0.19

0.24

Riskless debt

0.02

NA

The covariance between the returns on SafeCo equity and DangerCo equity is 8.865

  1. 15 points: What fraction of the optimal risky portfolio is composed of SafeCo stock?
  2. 5 points: What percentage of her money should Alice put in the risky portfolio if her coefficient of risk aversion is 2.6?
  3. 5 points: What percentage of her money should Bob put in the risky portfolio if his coefficient of risk aversion is 3.4?
  4. 5 points: What is the difference between the Sharpe Ratios of Alices complete portfolio and Bobs complete portfolio?

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