Please provide detailed explanations to the answers.

Suppose that the risk-free rate is 3% and that the corresponding optimal risky portfolio has an expected return of 15% and a standard deviation of 20%. Consider an investor with preferences represented by the utility function U Er)-0.5Ao2, where A -2. (a) What fraction of her wealth should she invest in the risky portfolio? (b) Should she invest more or less fraction of her wealth in the optimal risky portfolio if she is more risk-averse? Why? (c) Should she invest more or less fraction of her wealth in the optimal risky portfolio if the optimal risky portfolio offers a higher expected return (but the same standard deviation)? Why? (d) If the risk-free rate is higher, what would you expect the optimal risky portfolio to differ from the current one (for 3% risk-free rate) in terms of expected return and standard deviation? (e) Now suppose that the investor faces a higher risk-free rate when borrowing (because you are facing more borrowing constraints than the government, or people won't allow you to borrow at Suppose that the risk-free rate is 3% and that the corresponding optimal risky portfolio has an expected return of 15% and a standard deviation of 20%. Consider an investor with preferences represented by the utility function U Er)-0.5Ao2, where A -2. (a) What fraction of her wealth should she invest in the risky portfolio? (b) Should she invest more or less fraction of her wealth in the optimal risky portfolio if she is more risk-averse? Why? (c) Should she invest more or less fraction of her wealth in the optimal risky portfolio if the optimal risky portfolio offers a higher expected return (but the same standard deviation)? Why? (d) If the risk-free rate is higher, what would you expect the optimal risky portfolio to differ from the current one (for 3% risk-free rate) in terms of expected return and standard deviation? (e) Now suppose that the investor faces a higher risk-free rate when borrowing (because you are facing more borrowing constraints than the government, or people won't allow you to borrow at