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Suppose annual stock market returns are lognormally distributed. The log annual stock market return has a mean of 10% and a standard deviation of 17%.

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Suppose annual stock market returns are lognormally distributed. The log annual stock market return has a mean of 10% and a standard deviation of 17%. The riskfree rate (not the log riskfree rate) you can lend at is 4% per year. You have constant relative risk aversion utility with relative risk aversion of 2 . a. What is the optimal percent of your portfolio invested in stock if your borrowing interest rate (not your log borrowing interest rate) is 5% ? (1 point) b. What is the optimal percent of your portfolio invested in stock if your borrowing interest rate (not your log borrowing interest rate) is 9% ? (1 point)

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