Consider three investors A, B, and C. Investor As risk aversion coefficient A = 5, Bs risk aversion coefficient B = 4.2, and Cs risk aversion coefficient C = 3. There is one risky asset, whose expected return is 10 percent and standard deviation is 12 percent. Suppose the risk-free borrowing rate is 4 percent and the risk-free saving rate is 3 percent. The objective of the three investors is to maximize E(rc) 0.005ic2, where E(rc) and c2 are the expected return and the variance of an investors portfolio and i = A, B, C.

(a) What is investor As optimal portfolio weight in the risky asset?

(b) What is investor Bs optimal portfolio weight in the risky asset?

(c) What is investor Cs optimal portfolio weight in the risky asset?