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You have $10,000 and you are thinking about how to invest it. You will choose between the risk-free Treasury-bill and a mutual fund. The expected
You have $10,000 and you are thinking about how to invest it. You will choose between the risk-free Treasury-bill and a mutual fund. The expected return for the mutual fund is 14% and its standard deviation is 20%. The risk-free rate is 5%. If you have to borrow from the institution, your borrowing rate is 7%. Assume your risk aversion coefficient is 2. How much should you invest in this mutual fund?.
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