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Optimal portfolio weight to invest in the risky asset

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A portfolio has an expected rate of return of 10% and a standard deviation of 25%. The risk-free rate is 3.50%. An investor has the following utility function: U = E(r) - (1/2)A*Variance. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset?

An investor has the utility function listed in problem 3 and is considering investing in a risky asset with an expected return of 14.25% and a standard deviation of 36% and a Treasury bill with a rate of return of 2.25%. If the investor's coefficient of risk aversion constant A is 2.5, what is their optimal portfolio weight to invest in the risky asset?

Reference no: EM132785265

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