A maximizing investor with preferences u(u, ơ) = 0.2µ – 0.50^2 will allocate a portfolio worth 4000 between a risk free asset with a return of 4 percent and the market asset with a return of 20 percent and risk of 4 percent. How many dollars should be invested in the market asset?

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter16: The Markets For Labor, Capital, And Land
Section: Chapter Questions
Problem 12P
icon
Related questions
Question
A maximizing investor with preferences u(u, o) =
0.2u – 0.50^2 will allocate a portfolio worth 4000
between a risk free asset with a return of 4 percent
and the market asset with a return of 20 percent and
risk of 4 percent. How many dollars should be
invested in the market asset?
%3D
Transcribed Image Text:A maximizing investor with preferences u(u, o) = 0.2u – 0.50^2 will allocate a portfolio worth 4000 between a risk free asset with a return of 4 percent and the market asset with a return of 20 percent and risk of 4 percent. How many dollars should be invested in the market asset? %3D
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Expected Utility
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc