Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 38%. The T-bill rate is 6%. Your client’s degree of risk aversion is A = 3.0, assuming a utility function U = E(r) - ½Aσ².What proportion, y, of the total investment should be invested in your fund?What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio?
