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Question 4 - (11 points) The following table which gives a stock analyst's estimates: Your coefficient of risk aversion is 6 and your utility function

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Question 4 - (11 points) The following table which gives a stock analyst's estimates: Your coefficient of risk aversion is 6 and your utility function is given by U=E(r)2A2 (a) (4 points) If the analyst's estimates of expected returns and standard deviations are correct, which risky asset do you prefer (you cannot form portfolios with FB, GOOG and M for this question). Why? (b) (4 points) Assume the CAPM assumptions hold. Assume the Wilshire 5000 is the market portfolio. How does a CAPM investor invest? Why? Provide the CAPM investor's optimal allocations to all the assets in the table above. (c) ( 3 points) Are GOOG and FB on the SML? Why or why not

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