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Find the optimal portfolio

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Reference no: EM132971953

Question - A wealth manager tells you that he has invested your wealth in a combination of a high growth stock and a stable income stock. He tells you that if the economy does well, the return of your portfolio will be 15%, and if there is a recession, you'll earn 7%. He calculates the probability of a recession to be 20%. Suppose you also have access to risk-free borrowing and lending at 3%. Find the optimal portfolio.

Reference no: EM132971953

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