Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 32% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%.

Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) ? 0.5 A?2. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

WBills WIndex U(A = 2)

0.0 1.0

0.2 0.8

0.4 0.6

0.6 0.4

0.8 0.2

1.0 0.0