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You manage a market index portfolio with an annual expected return of 12% and standard deviation of 20%. The T-bill rate is 5%. Your client's
You manage a market index portfolio with an annual expected return of 12% and standard deviation of 20%. The T-bill rate is 5%. Your client's degree of risk aversion is A=4. What proportion of your client's money should be invested in the market index fund, and what proportion should be invested in the T-bill?
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