Jack and Diane, grew up in the heartland, have now been married for 20 years and would like to invest some money. Assume the risk free rate is 2% annually. They take a test that rates their individual risk preference. Jack is given a 5 and Diane a 2.

Expected return Standard Deviation

6% 10%

8% 20%

12% 25%

1. Which investment can the couple agree on, that it is better than the risk free asset?

2. What is the optimal y (risky) for Jack?

Question

Jack and Diane, grew up in the heartland, have now been married for 20 years and would like to invest some money. Assume the risk free rate is 2% annually. They take a test that rates their individual risk preference. Jack is given a 5 and Diane a 2.

Expected return	Standard Deviation
6%	10%
8%	20%
12%	25%

1. Which investment can the couple agree on, that it is better than the risk free asset?

2. What is the optimal y (risky) for Jack?

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Question

Jack and Diane, grew up in the heartland, have now been married for 20 years and would like to invest some money. Assume the risk

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