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Investors can form complete portfolios out of two assets: a risk-free asset (T-bill) with a rate of return of 5%; and a risky portfolio with
Investors can form complete portfolios out of two assets: a risk-free asset (T-bill) with a rate of return of 5%; and a risky portfolio with an expected return of 10% and return standard deviation of 30%. Sara's coefficient of risk aversion is 3. Sara's optimal complete portfolio will have approximately 50% in the risky portfolio and 50% in the risk-free asset. 100% in the risky portfolio. 19% in the risky portfolio and 81% in the risk-free asset. 56% in the risky portfolio and 44% in the risk-free asset
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