Question 17

5 Points

29	You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the S&P 500 Index has the following:
30	E(rm)	13.00%
31	SDm	25.00%
32	rf	8.00%
33
34	You compare that with an active portfolio:
35	E(rp)	18.00%
36	SDp	28.00%
37	rf	8.00%
38
39	Your client has a Risk Aversion coefficient of	5
40
41	Proportion y Model	y =( E(fm) - rf) / (A*VARm)
42
43
44	If your client chose to invest in the passive portfolio, what proportion, y, would he select?

y = 17%

y = 16%

y = 14.85%

y = 15%