Refer the table below on the average excess return of the U.S. equity market and the standard deviation of that excess return. Suppose that the U.S. market is your risky portfolio.

Required:

If your risk-aversion coefficient is A = 5.1 and you believe that the entire 19272021 period is representative of future expected performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is U = E(r) 0.5 A²squared.

What if you believe that the 19751998 period is representative?

\begin{tabular}{cccccc} & \multicolumn{3}{c}{ Average Annual Returns } & \multicolumn{3}{c}{ U.S. Equity Market } \\ \cline { 2 - 6 } Period & U.S. equity & 1-MonthT-Bills & Excess return & StandardDeviation & Sharpe Ratio \\ 19272021 & 12.17 & 3.30 & 8.87 & 20.25 & 0.44 \\ 19271950 & 10.26 & 0.93 & 9.33 & 26.57 & 0.35 \\ 19511974 & 10.21 & 3.59 & 6.62 & 20.32 & 0.33 \\ 19751998 & 17.97 & 6.98 & 10.99 & 14.40 & 0.76 \\ 19992021 & 10.16 & 1.66 & 8.50 & 18.85 & 0.45 \end{tabular}