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Question 1 : A risky investment has a 15% expected return & 25% volatility. The risk-free rate is 4%. At what risk aversion coefficient (A)

Question 1 : A risky investment has a 15% expected return & 25% volatility. The risk-free rate is 4%. At what risk aversion coefficient (A) would the investor be indifferent between the risky investment and T-Bills?

Question 2: Stocks have outperformed T-Bills by about 7% per year over the past 95+ years. Use utility theory to explain why an investor might want to investment in T-Bills.

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