You have just inherited $10,000, and need to determine how much to invest in the fund of your favorite investment firm; you will put the rest in treasuries at the risk-free rate.

You have estimated the following parameters: the risk-free rate is 2%, the portfolio return is 5.7%, the market return is 12%, the Variance of the portfolio is 6%, the Variance of the market is 14%, your risk aversion level is 3.8, and the portfolio beta is 1.26.

What proportion do you need to invest in that fund (the "y-ratio" as described in the text)?

Select one:

a. 0.07

b. 0.16

c. 0.62

d. 0.53

e. 6.16