The information contained in the table below shows the expected return and standard deviation for a risky asset and risk-free asset. Asset Expected Return Risk (Standard Deviation) Risky Asset 13.00% 27.00% Risk-Free Asset 2.50% 0.00% Coefficient of Risk Aversion 1.0 Required: Using the information in the tables above, determine the optimal allocation to the risky asset. Use the MIN functions to ensure no leverage is deployed.
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The information contained in the table below shows the expected return and standard deviation for a risky asset and risk-free asset.
Asset | Expected Return | Risk (Standard Deviation) |
---|---|---|
Risky Asset | 13.00% | 27.00% |
Risk-Free Asset | 2.50% | 0.00% |
Coefficient of Risk Aversion |
---|
1.0 |
Required:
Using the information in the tables above, determine the optimal allocation to the risky asset. Use the MIN functions to ensure no leverage is deployed.
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