Arisky fund has an expected return of 9% and standard deviation of 15%. The T-Bill rate...

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Answer 1

Answer #1

Proportion of risky assets= (Expected return - Risk free return)/ (A * SD^2)

1.25 = (0.09 - 0.03) / (A * 0.15^2)

1.25 = (0.06 / (A * 0.0225)

A * 0.0225 = 0.06 / 1.25

A * 0.0225 = 0.048

A = 0.048 / 0.0225

A = 2.13

Investor's risk aversion coefficient (A) = 2.13

Answer 2

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