Exercise 3.1 (calibrating risk aversion). Suppose we do not know the relative risk aversion of our investor. We know, however, that her financial situation is the same as in Example 3.1 and that the available assets display the same characteristics. Furthermore, we have just learned that our investor has decided to invest 300 000 in the risky asset for one year. Assuming that her preferences are described by CRRA utility, find her coefficient of relative risk aversion. Exercise 3.1 (calibrating risk aversion). Suppose we do not know the relative risk aversion of our investor. We know, however, that her financial situation is the same as in Example 3.1 and that the available assets display the same characteristics. Furthermore, we have just learned that our investor has decided to invest 300 000 in the risky asset for one year. Assuming that her preferences are described by CRRA utility, find her coefficient of relative risk aversion