Question 10

5 Points

66	You have obtained the following data on the S&P 500 Index and T-Bills:
67	Period of time	1926 - 2015
68	Average S&P Return	11.77%
69	Average Tbill Return	3.47%
70	Risk Premium	8.30%
71	SD of S&P	20.59%
72	Sharpe Ratio	0.4031
73	Portfolio Split 50/50 with risky and risk free	50%
74	You have a risk aversion coefficient where A =	4.0
75	The higher that A becomes, the more averse you are to risk.
76	This level of A will impact both your expected return and standard deviation of a portfolio.
77
78	Expected Return on Entire Portfolio: E(rc) = (1-y)*rf + (y)*E(rp)
79	Client's Proportion of the Risky Portfolio Standard Deviation = (y)*(SD of Risky Portfolio)

What is your Utility Function based upon your risk aversion coefficient of 4.0?

Utility Function Model: Utility = Erp - (.5)*A*Variance of Risky Portfolio

3.29%

3.92%

2.29%

4.29%