Question
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
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
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