For problem12-16, assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%.

12. Your client chooses to invest 70% of a portfolio in your fund and 30% in a t bill money market fund.

Additional "Turn-In" Problem 1 (Optimal Asset Allocation) Use the information in end-of-chapter problem 12, and assume your client's utility function is 1. What is his optimal allocation y, if his risk aversion, A, is 2, 5, or 10? How does the optimal allocation change with risk aversion? Explain the intuition. 2, what happens to his optimal allocation if the expected return on your fund goes up to 20% (for A -2 only; other assumptions stays the same as in problem 12)? Explain the intuition for the change. 3, what happens to his optimal allocation if the T-bill rate drops to 5% (for A # 2 only, other assumptions stays the same as in problem 12)? Explain the intuition for the change. 4. What happens to his optimal allocation if the return standard deviation of your fund goes up to 35% (for A-2 only; other assumptions stays the same as in problem 12)? Explain the intuition for the change. 18