Question
The Gupta family wants to invest $100,000 with their private banker Ana Gonzales. Despite the fact that Gupta Senior bragged about day trading stocks, Ana
The Gupta family wants to invest $100,000 with their private banker Ana Gonzales. Despite the fact that Gupta Senior bragged about day trading stocks, Ana concluded that Gupta's degree of risk aversion is really 5. The current 1 month T Bill trades at 5.00%. Ana advises the Guptas to simply buy the stock market portfolio M, with an expected return of 15% and a standad deviation of 20%. Ana concludes that: (1) the Guptas should invest ___________ in the market portfolio; (2) _________ in the risk-free asset; and (3) the volatility of the resulting complete portfolio will be _______ .
a. | $62,500; $37,500; 12.5% | |
b. | $50,000; $50,000; 10% | |
c. | $37,500; $62,500; 7.5% | |
d. | $60,000; $40,000; 12% |
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