Question
In: Finance
The optimal risky portfolio constructed using the stock fund and the bond fund should be (wstock=40%,...
The optimal risky portfolio constructed using the stock fund and the bond fund should be (wstock=40%, wbonds=60%). The optimal risky portfolio’s expected return is 15%, and its standard deviation is 27%. The risk-free rate is 5%.
Jessica has a risk aversion level of 3. In her optimal complete portfolio, what is the proportion of the stock fund?
Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321.
Solutions
Expert Solution
proportion of optimal risky portfolio=(15%-5%)/(3*27%*27%)=0.4572
Proportion of stock fund=0.4572*40%=0.1829
jeff jeffy answered 2 years agoRelated Solutions
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points)
Expected return
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