Assume a risky investment has a return = 15% and a risk = 24%. The risk...
Assume a risky investment has a return = 15% and a risk = 24%. The risk free rate = 8%. What level of risk aversion would make the investor indifferent between the risky investment and T-Bills?
Homework Answers
The coefficient of risk aversion is:
A = ( Risky return - risk free return )/ SD^2
A = ( 15% - 8%)/ (24%*24%) = 1.22
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