Reference no: EM132189996

Question - Given the data below, how should James, your client with $20,000 to invest and  risk aversion coefficient of A=3, invest his money?

The Optimal Risky Portfolio has 40% expected return and 30% standard deviation and consists of 70% equities and 30% corporate bonds.

The Minimum Variance Portfolio has 25% expected return and 20% standard deviation and consists of 60% equities and 40% corporate bonds.

There is a T-bill investment available with a risk free return of 2% and money can be borrowed for investment purposes at 4%.

A. Equity: $4929 Bonds: $3286 T-Bill: borrow $3215

B. Equity: $4222 Bonds: $1809 T-Bill: invest $1031

C. Equity: $4500 Bonds: $3000 T-Bill: borrow $2500

D. Equity: $4000 Bonds: $1714 T-Bill: borrow $714

You have shorted 10 shares in a company at $88. The initial margin was 60% and the maintenance margin is 25%. A few days after the transaction, the company paid $1 dividends and after another few days, the shares price went to $95.

What is your percentage margin? Provide your answer in percent, rounded to two decimals, omitting the % sign.