What is the utility of the risky portfolio for the investor

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Question - A risky portfolio has an expected return of 20% and a standard deviation of 23%. Short-term T-bills have a return of 6%. An investor has $8,000 to invest and needs to decide between investing in the risky portfolio and T-bills. Suppose that the investor has the utility function U = E(rp) - (½ A σ2) and a risk-aversion parameter of A = 3.4.

Required -

Part 1 - What is the utility of the risky portfolio for the investor?

Part 2 - What is the utility of the T-bills for the investor?

Reference no: EM132812998

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