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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%
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 21% 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 = 3. Assume the utility function is u = E(r) - 0.5 x Ao2. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 4 decimal places.) U(A = 3) WBills 0.0 0.2 0.4 Windex 1.0 0.8 0.6 0.4 0.2 0.0 0.6 0.8 1.0
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