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Equity fund to maximize expected utility

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An investor can choose to invest in two diversified funds: one predominantly debt and one equity. The mean of debt is 0.0679 and the variance of debt is 0.061, while the mean and variance of equity fund are 0.0784 and 0.0839. The covariance between the two funds is 0.11. The risk-free rate of return is 0.11. What percentage of their investment would an investor with risk aversion coefficient of 3 invest in the equity fund to maximize their expected utility?

Reference no: EM133116091

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