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Find what optimal percentages of money must be invested

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Reference no: EM132599721

You invest $2,000 in a risky asset with an expected rate of return of 0.13 (and a standard deviation of 0.20) and a T-bill with a rate of return of 0.03.

Question 1: Knowing that the coefficient of risk aversion equals 5, to form a portfolio, what optimal percentages of your money must be invested in the risky asset and the risk-free asset, respectively?

choose correct option:

Option 1.) 85% and 15%

Option 2.) 50% and 50%

Option 3.) 75% and 25%

Option 4.) 57% and 43%

Option 5.) Cannot be determined.

Reference no: EM132599721

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