PQUESTION 21AnswerYou invest $100 in a risky asset with an expected rate of return of 0.169 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05. How to form a portfolio that has an expected outcome of$129?For the toolbar, press ALT+F10(PC) or ALT+FN+F10(Mac).BIUSParagraphArial10ptT πT<土√TTEAVㄧˇIx田く田里训

Step 1:For $100,(129 - 100)/100=15%;0.15 = w1(0.169) + (1 - w1)(0.05)0.15 = 0.169w1 + 0.05 -…

Answered: P QUESTION 21 Answer You invest $100 in…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assuming your utility function U = E(r) - Ao². Consider the investments shown in the table. If your risk aversion coefficient is -2, which investment would you choose? Investment E[r] #1 #2 #3 #4 #2 #3 #4 #1 12% 15% 15% 24% σ 40% 40% 30% 40%
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