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Greta has risk aversion of A=4 when applied to return on wealth over a one-year horizon. 5 he is pondering two.portfolios, the 5SP $00 and

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Greta has risk aversion of A=4 when applied to return on wealth over a one-year horizon. 5 he is pondering two.portfolios, the 5SP $00 and a hedge fund, as well as a number of cne-year strategles. (All rates are annual and continuously compounded) The SSP 500 risk. premilum is estimated at 8% per year, with o standard deviation of 18%. The hedge fund risk premium is estimated at 10% with a standard deviation of 33\%. The returns on both of these portfolios in any particular year are uncorrelated with its own refurns in ocher years, They ore also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual return on the S\&P 500 and the hedge fund retum in the same year is zero, but Greta is not fuliy convinced by this elaim. What should be Greta's capital aliocation? (Do not round your intermediate calculations. Round your answers to 2 decimal ploces.) Greta has risk aversion of A=4 when applied to return on wealth over a one-year horizon. 5 he is pondering two.portfolios, the 5SP $00 and a hedge fund, as well as a number of cne-year strategles. (All rates are annual and continuously compounded) The SSP 500 risk. premilum is estimated at 8% per year, with o standard deviation of 18%. The hedge fund risk premium is estimated at 10% with a standard deviation of 33\%. The returns on both of these portfolios in any particular year are uncorrelated with its own refurns in ocher years, They ore also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual return on the S\&P 500 and the hedge fund retum in the same year is zero, but Greta is not fuliy convinced by this elaim. What should be Greta's capital aliocation? (Do not round your intermediate calculations. Round your answers to 2 decimal ploces.)

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