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Prefer the risk free asset than the risky portfolio

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The utility function of an investor is U = E(r) - 0.5Aσ2. The risk free rate is 2%. The risky portfolio has an expected return of 10% and standard deviation of 20%. Answer the following questions.

(a) What is condition of A to make the investors prefer the risky portfolio than the risk free asset?

(b) What is condition of A to make the investors prefer the risk free asset than the risky portfolio?

Reference no: EM132953678

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