Suppose that the world's economy consists of only two risky assets (XOM and INTC) and one risk-free asset (F). The risk-free rate is currently 5%. The possible risky asset returns are described below:

Scenario Probability	XOM Return	INTC Return
20%	10%	-30%
20%	-10%	-5%
40%	20%	15%
20%	-5%	50%

Suppose that you are a wealth manager for a client with the type of utility function described in class where her risk aversion is A = 2.

a) What are the expected returns and volatilities of XOM and INTC? What is their correlation?

b) If your client can purchase only a single asset (i.e., XOM only, INTC only or F only), which asset would your client prefer? (Hint: compare client's utilities)

c) Would your client prefer a portfolio (call it E) consisting of 50% XOM and 50% INTC to the asset that you identified in part (b)? (Hint: compare client's utilities)