Consider a portfolio consisting of two risky assets with initial values of $100 and $450, that have a correlation coefficient of =0.5, whose rates of

Consider a portfolio consisting of two risky assets with initial values of $100 and $450, that have a correlation coefficient of ρ=0.5, whose rates of returns follow a bivariate normal distribution and:

(a) Suppose that the initial value of the portfolio was $4000. Determine the allocation weights w1 and w2 for Assets 1 and 2 in a maximum expected utility portfolio if the utility used is u(v)=−e^(−0.001∗v).

(b) Using the results in part (a), determine the number of shares x1 and x2 of Assets 1 and 2 in the portfolio.

(c) Using the rounded results from above, determine the expected rate of return on the maximum expected utility portfolio.

(d) Determine the standard deviation in the rate of return on the maximum expected utility portfolio.