Estimate the passive portfolio using given information

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Reference no: EM131970960

Question: You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the S&P 500 stock index, yields an expected rate of return of 15% with a standard deviation of 24%. You manage an active portfolio with an expected return of 22% and a standard deviation of 34%. The risk-free rate is 6%. Your client's degree of risk aversion is A = 1.7.

a. If he chose to invest in the passive portfolio, what proportion, y, would he select? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Proportion of y %

Reference no: EM131970960

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