Questions

Suppose you have preferences given by U=E[r]21A2 with A=10. You are considering forming a portfolio at t=0 based on the following two assets: - Asset 1 has a current value of $100 per share - Asset 2 has a current value of $100 per share The payoffs of the two assets at t=1 are described as follows: What is the expected return on the risky asset? Express your answer as a percent, rounded to the nearest percent (e.g., if you answer is 0.084 or 8.4%, fill in 8 in the answer box). What is the return volatility of the risky asset? Express your answer as a percent, rounded to the nearest percent (e.g., if you answer is 0.084 or 8.4%, fill in 8 in the answer box). What is the risk free rate? Express your answer as a percent, rounded to the nearest percent (e.g., if you answer is 0.084 or 8.4%, fill in 8 in the answer box). What fraction of your portfolio goes into Asset 1 ? Express your answer as a percent, rounded to the nearest percent (e.g., if you answer is 0.084 or 8.4%, fill in 8 in the answer box). What fraction of your portfolio goes into Asset 2? Express your answer as a percent, rounded to the nearest percent (e.g., if you answer is 0.084 or 8.4%, fill in 8 in the answer box)