Calculate utility levels of each portfolio for an investor

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Question - Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 90 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 20% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%.

Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U= E(r) - 0.5 x Aσ2.

Reference no: EM132184109

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