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Could you explain how I would get the optimal split of the portfolio below? Mr. Savings has a risky asset, with an expected return of
Could you explain how I would get the optimal split of the portfolio below?
Mr. Savings has a risky asset, with an expected return of 30% and standard deviation of 10%, and a risk free asset, with an expected return of 10% and standard deviation of 0%. He also has the utility function u(rx, x) = min (rx, 30 -2x). What are his optimal values of rx and x?
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