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Assume you have two investors, S and T. They wish to invest in one of three possible portfolios. The portfolios characteristics are described in the

Assume you have two investors, S and T. They wish to invest in one of three possible portfolios. The portfolios characteristics are described in the table below.

Portfolio

E(r)

(std)

A

10%

0.07

B

12%

0.18

C

13%

0.29

  1. (10p) Which portfolio should Investor S and investor T respectively chose if their risk aversions are 2.5 (S) and 3.5 (T) respectively?
  2. (2p) Which investor will end up with the highest expected return? (support the answer)

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