Assume that investorIholds a portfolioPwhich includes stockSand the risk-free asset. Expected return fromSis 8% and standard deviation ofSis 20%. Of the total value ofP,the investor investswinSand (1 -w) in the risk-free asset. The risk-free asset yields 2.5% and shorting the risk-free asset is not possible. However,Ican borrow money at the 3% rate.Assume thatA= 1and the annual fee for investing in stockSis 2%.Ichooseswso that it maximizes her utility.

Ihas a utility functionU=E(r)1/2*A*^2

whereAis the coefficient of risk aversion.

What is the value ofw?

What is the expected return of this portfolio?

What is the Sharpe's measure of this portfolio?