Finance
Continuing with the same fund data:
Year | Total Return |
2016 | 2% |
2017 | -12% |
2018 | 10% |
2019 | 18% |
2020 | -5% |
a. The standard deviation of the fund is 12%. If the US T-bill rate is 1%, and investors’ utility functions follow the formula,
U = E( r) – ½ As2
Suppose one investor has a coefficient of risk aversion of A = 2, while another investor has a coefficient of risk aversion of A=6. Calculate the Certainty Equivalent Rates for this fund for each investor.
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