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The certainty equivalent of the optimally chosen combination equals, 0 .1150.5(3.5)(0.12) = 0. 0975. The investor gains 0.0975 0.08 = 0.0175 or 1.75% by choosing

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The certainty equivalent of the optimally chosen combination equals, 0 .1150.5(3.5)(0.12) = 0. 0975. The investor gains 0.0975 0.08 = 0.0175 or 1.75% by choosing the optimal combination instead of investing in the riskfree asset alone or the risky asset alone

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