Suppose you are a chief officer for a money management firm that specializes in advising individual investors. You use an integrated asset allocation strategy. You are trying to establish a strategic asset allocation for two clients, Mrs. Howard and Mr. Thomson. Mrs. Howard has a risk tolerance factor of 7. Mr. Thomson has a risk tolerance factor of 32. The table below shows the characteristics of four possible portfolios.
		Asset Mix
				Stock	Bond	ER	s2
		Portfolio 1		10%	90%	6%	5%
		Portfolio 2		30%	70%	7%	11%
		Portfolio 3		70%	30%	8%	19%
		Portfolio 4		90%	10%	9%	29%

1. Calculate the expected utility for each possible portfolio for each of the two clients. Show your calculations.
2. Which portfolio is the optimal strategic allocation for Mrs. Howard?
3. Which portfolio is the optimal strategic allocation for Mr. Thomson?
4. Why is there a difference between the strategic allocations of Mrs. Howard and Mr. Thomson? Explain.