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You have two portfolios for your clients to choose from or combine. One is an actively managed portfolio with an expected return of 18% and
You have two portfolios for your clients to choose from or combine. One is an actively managed portfolio with an expected return of 18% and standard deviation of 28%. The other is a passive, index portfolio with an expected return of 13% and standard deviation of 25%. If your client has an aversion value of 3.5, determine the optimal proportions in which she should combine the two. The risk free rate is 8%.
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