Utility Functions: Alice has a coefficient of risk aversion of 3.9, Zheng has a coefficient of risk aversion of 2.1.

a. If Alice had to choose between a portfolio with an expected return of 9% and a standard deviation of 10%, and a portfolio with an expected return of 8% and a standard deviation of 9%, which would she pick?

b. You have a portfolio with an expected return of 10% and a standard deviation of 10%. Both Alice and Zheng are interested in buying it. Who will offer you a better price? Hint: If they were paying you with a riskless bond they issued, who would offer the more valuable bond?