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What proportion of the endowment will be invested in fb

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Reference no: EM132835617

An endowment manager is presented with a risky portfolio that has an expected rate of return of 15% and a standard deviation of 44%. The risky portfolio includes the following investments in the given proportions.

MSFT      30%
Apple      15%
FB          55%

Problem 1: The endowment manager estimates its clients' risk aversion coefficient to be 5 and will make its allocation decision between the risky portfolio above and a riskless alternative yielding 1.8% in a utility maximizing manner. Ultimately what proportion of the endowment will be invested in FB?

Reference no: EM132835617

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