Newly issued t-bill with annual rate of return

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Reference no: EM131323078

The investor invest in a newly issued T-bill with annual rate of return at 5%. With risk-aversion level at A=4, the investor is considering to hold a porfolio of stock ( Stock Expected return =0.25 SD=0.21) and risk-free asset, instead of holding the stock alone. Is this a wise decision for the invesor? Why or Why not. If so, how much the invesotr have to invest in stock and T-bill, respectively ?

Reference no: EM131323078

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