You are a manager of a risky portfolio p (consists of bonds and stocks) with an expected return E(p) = 16% and standard deviation sdevp = 22%. The risk free rate rf =

7% and the standard deviation of the risk free asset is sdevs = 0%

Assume the following utility function: U = E(r) - 0.5 x A x sdev?, where A (client's risk aversion)=3. Calculate the weight in the risky portfolio (p) that maximizes the utility of

the client. Select the closest answer.

O A.68%

O B. 62%

O C. 72%

O D. 50%

You are a manager of a risky portfolio p (consists of bonds and stocks) with an expected return E(p) = 16% and standard deviation sdevp = 22%. The risk free rate rf =

7% and the standard deviation of the risk free asset is sdevf = 0%

Calculate the utility investors realize from investing 40% of their capital in your portfolio (p) and 60% (f) in the risk-free asset. Assume the following utility function: U =

E(r) - 0.5 x A x sdev?, where A (client's risk aversion)=3. Select the closest answer.

O A. -0.026

B. -0.013

O C. 0.094

D. 0.000