Question 3a Convince your friend that her portfolio, RALPHA, is not that great. Show her that she can do better than this portfolio by proposing to her a better portfolio. In this question, you should find her a better portfolio using the market portfolio, RMkt, and the riskfree asset, Rf, that has the same expected return as RALPHA(4%). What is the weight you will put on the market portfolio? (Round to 3 decimal places) Question 9 3 pts Question 3a Given the weight, what is the standard deviation (round to 2 decimal places)) of your portfolio? Note: if the solution is 20%, please enter 0.20 in the box and not 20 . Now, Kots find the optimal pottralio that your fried should actually be iaverting in. Suppose your frimal has preferences defined by the standard atility frinctioti: U=E(R,21Rl2 in which E(R,)andR ase, respectively, the expected return and the variance of the retaras of security fi: optimal portiolio (call it P2). For the ariserer to be coimplete, your need to seport the peoportion that yot should invert in cach sceurity to conate this optinal portfolio P2, and almo the expected return and standrud deviation of the returas of thir optioal portfols P2. Question 10 Question 3b You know that A is 5. You have convinced your friend in Q3a to invest in the risk-free asset and in the market portfolio Calculate the fraction that your friend should invest in the market XMR.- (You can use the equation in the formula sheet posted here and just write down whatever you get and round it to 3 decimal places. Do not add % at the end of your answer) Question 11 2 pts Question 3b What is the expected return (in percentage, round to 2 decimal places) of the optimal portfolio? Note: if the solution is 20%, please enter 0.20 in the box and not 20 . Question 3b What is the standard deviation (round to 2 decimal places)) of the optimal portfolio? Note: if the solution is 20%, please enter 0.20 in the box and not 20. Question 3a Convince your friend that her portfolio, RALPHA, is not that great. Show her that she can do better than this portfolio by proposing to her a better portfolio. In this question, you should find her a better portfolio using the market portfolio, RMkt, and the riskfree asset, Rf, that has the same expected return as RALPHA(4%). What is the weight you will put on the market portfolio? (Round to 3 decimal places) Question 9 3 pts Question 3a Given the weight, what is the standard deviation (round to 2 decimal places)) of your portfolio? Note: if the solution is 20%, please enter 0.20 in the box and not 20 . Now, Kots find the optimal pottralio that your fried should actually be iaverting in. Suppose your frimal has preferences defined by the standard atility frinctioti: U=E(R,21Rl2 in which E(R,)andR ase, respectively, the expected return and the variance of the retaras of security fi: optimal portiolio (call it P2). For the ariserer to be coimplete, your need to seport the peoportion that yot should invert in cach sceurity to conate this optinal portfolio P2, and almo the expected return and standrud deviation of the returas of thir optioal portfols P2. Question 10 Question 3b You know that A is 5. You have convinced your friend in Q3a to invest in the risk-free asset and in the market portfolio Calculate the fraction that your friend should invest in the market XMR.- (You can use the equation in the formula sheet posted here and just write down whatever you get and round it to 3 decimal places. Do not add % at the end of your answer) Question 11 2 pts Question 3b What is the expected return (in percentage, round to 2 decimal places) of the optimal portfolio? Note: if the solution is 20%, please enter 0.20 in the box and not 20 . Question 3b What is the standard deviation (round to 2 decimal places)) of the optimal portfolio? Note: if the solution is 20%, please enter 0.20 in the box and not 20
