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