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Suppose that an investor's human capital is close to riskless. She decides to invest in a diversified portfolio of stocks with an expected return of
Suppose that an investor's human capital is close to riskless. She decides to invest in a diversified portfolio of stocks with an expected return of and volatility of Her other option is a riskfree bond that pays every year. Her riskaversion coefficient is A Assume that the value of her human capital is $ million and her financial wealth is $ million. How much should she allocate to the riskfree bond?
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$ million
$ million
$ million
$ million
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