Answered step by step
Verified Expert Solution
Question
1 Approved Answer
how did we find (0.0225) and -0.01125? 2. A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The
how did we find (0.0225) and -0.01125?
2. A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U=E(r)(A/2)s2. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset? 0.06=0.15A/2(0.15)20.060.15=A/2(0.0225)0.09=0.01125AA=8U=0.158/2(0.15)2=6% Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started