Optimal investment consisting only of the market index

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A variance-averse investor has utility function ( , 2)= -( /2) 2, where is portfolio expected return, is portfolio standard deviation and is the investor's risk-aversion coefficent. If the risk-free rate rate of return is 3%, the average return on the market index is 7% and the standard deviation of the market index is 30%, what risk aversion coefficient would justify an optimal investment consisting only of the market index?

Reference no: EM132577714

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