RRF = 0.06

RA=1%+1.2RM R-square =.576 Residual standard deviation =10.3% RB=2%+0.8RM R-square =.436 Residual standard deviation =9.1% Q#3: [15 PONITS] Using the two assets in question 3 above, assuming that the coefficient of risk aversion (A) and the correlation of the two assets are 4 and 0.6, respectively, find the portfolio that maximizes the individual's utility given below: U=E(rP)21AP2 [Hint: first define E(rP) and P2 as a function of the two assets and substitute them in the utility function before you optimize it] RA=1%+1.2RM R-square =.576 Residual standard deviation =10.3% RB=2%+0.8RM R-square =.436 Residual standard deviation =9.1% Q#3: [15 PONITS] Using the two assets in question 3 above, assuming that the coefficient of risk aversion (A) and the correlation of the two assets are 4 and 0.6, respectively, find the portfolio that maximizes the individual's utility given below: U=E(rP)21AP2 [Hint: first define E(rP) and P2 as a function of the two assets and substitute them in the utility function before you optimize it]