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What are the expected returns and standard deviations

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Suppose a stock fund has an expected return of 15% and standard deviation of 20%. The T-bill rate is 3%, while the borrowing rate faced by investors is 8%. There are two investors Emmy and Lucas with coe?cients of risk aversion 6 and 1.2, respectively.

a. What are optimal proportions in risky stock fund by each investor?

Emmy:______________?

Lucas:______________?

b. What are the expected returns and standard deviations of their portfolios?

For Emmy,

E(r) = _______________?

σr = ________________?

For Lucas,

E(r) = _______________?

σr = _________________?

Reference no: EM132795971

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