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You have the following assets available to you to invest in: Asset Expected Return Standard Deviation Risky debt 6% 0.25 Equity 10% .60 Riskless debt
You have the following assets available to you to invest in:
Asset | Expected Return | Standard Deviation |
Risky debt | 6% | 0.25 |
Equity | 10% | .60 |
Riskless debt | 4.5% | 0 |
The coefficient of correlation between the returns on the risky debt and equity is 0.72
2D. Hector has a coefficient of risk aversion of 1.8. What percentage of his assets should he invest in the risky portfolio?
2E. What would the expected return be on Hectors portfolio?
2F. What would the standard deviation of Hectors portfolio be?
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