You are optimistic about Telecom shares. The current market price is $40 per share and you have $5000 of your own to invest. You borrow an additional $5000 from your broker and invest $10 000 in the shares.

You manage a risky portfolio with expected rate of return of 15% and standard deviation of 20%. The risk free rate is 4%. Consider the following: (i) You choose to invest 80% in the risky portfolio and 20% in the risk-free rate. Using the utility function (U = E (r) 1/2 A 2), calculate the utility derived from this complete portfolio if you had a coefficient of risk aversion (A) of 4. (ii) Calculate the asset allocation between the risk-free asset and the risky portfolio that would maximise the utility for an investor with a coefficient of risk aversion (A) of 3.