What is the optimal portfolio weight to invest in the risk

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Question 1: An investor has the utility function listed in problem 3 and is considering investing in a risky asset with an expected return of 14.25% and a standard deviation of 35% and a Treasury bill with a rate of return of 3.95%. If the investor's coefficient of risk aversion constant A is 2.0, what is their optimal portfolio weight to invest in the risky asset?

Question 2: Using the information from problem 4, the investor decides that the optimal weight to invest in the risky asset y* calculated in problem 4 seems too low, and so the investor decides to invest a higher percent of the complete portfolio, namely 50%, in the risky asset to raise both the risk and the expected return for the complete portfolio. What is the expected return for the non-optimal complete portfolio with this increased level of risk?

Reference no: EM132483141

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