1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
nydimaria [60]
2 years ago
10

f your risk-aversion coefficient is A = 4 and you believe that the entire 1926–2015 period is representative of future expected

performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is U = E(r) – 0.5 × Aσ2. and 51.05%

Physics
1 answer:
siniylev [52]2 years ago
7 0

Answer:

The portfolio should invest 48.94% in equity while 51.05% in the T-bills.

Explanation:

As the complete question is not given here ,the table of data is missing which is as attached herewith.

From the maximized equation of the utility function it is evident that

Weight=\frac{E_M-r_f}{A\sigma_M^2}

For the equity, here as

  • Weight is percentage of the equity which is to be calculated
  • {E_M-r_f} is the Risk premium whose value as seen from the attached data for the period 1926-2015 is 8.30%
  • A is the risk aversion factor which is given as 4.
  • \sigma_M is the standard deviation of the portfolio which from the data for the period 1926-2015 is 20.59

By substituting values.

Weight=\frac{E_M-r_f}{A\sigma_M^2}\\Weight=\frac{8.30\%}{4(20.59\%)^2}\\Weight=0.4894 =48.94\%

So the weight of equity is 48.94%.

Now the weight of T bills is given as

Weight_{T-Bills}=1-Weight_{equity}\\Weight_{T-Bills}=1-0.4894\\Weight_{T-Bills}=0.5105=51.05\%\\

So  the weight of T-bills is 51.05%.

The portfolio should invest 48.94% in equity while 51.05% in the T-bills.

You might be interested in
When water moves from a gas state to a liquid state, it is experiencing ______.
son4ous [18]

It is called condensation. Hope this helped!
8 0
2 years ago
Read 2 more answers
If the moon were twice as far from years as it is now the following would be true
zubka84 [21]
The question is incomplete.

The distance between the Moon and Earth influences: 1) the attractive gravitational force between them, 2) the tides, 3) the eclipses, 4) the period of each full turn of the moon around the Earth.

Assuming the question refers to the gravitational attraction, we must use the fact that, as per, Newton's Universal Gravitaional Law, the attractive force between the two bodies is inversely related to the square distance that separates them.

Then, if the Moon were twice as far, the gravitational pull would be one fourth (1/4) of actual pull.

7 0
3 years ago
What is meant by the statement '' density of water is 1000 kilograms per cubic metre ''?
LenKa [72]
It means that if you had a cubic meter of water it would weigh 1000 kilograms
4 0
3 years ago
what will happen to the brightness of the other bulbs in a series circuit if any of the bulbs were to burn out?
Ivenika [448]

Answer:

not work.

Explanation:

if u are saying in a series circuit...

if 1 build burns out and theres other bulbs the circuit wont work anymore.

6 0
3 years ago
Which sphere is NOT a part of the cycling of oxygen through Earths systems ?
stepan [7]
The answer would be Exosphere because, there are 3 main regions that circulate oxygen through the Earths system, which are the Biosphere, Atmosphere, and the Lithosphere. 
5 0
3 years ago
Other questions:
  • Recall the previous question and the scenario with Zamir and Talia finding their way through a maze. Why is their displacement t
    6·2 answers
  • A women who normally weighs 400 N stands on top of a ladder so high she is one full additional earth radius above the surface of
    7·1 answer
  • How much work is done by the force lifting a
    5·1 answer
  • How does sound travel through<br> different mediums?
    9·1 answer
  • Plz help need answer ASAP thanks
    10·1 answer
  • How are desert plants adapted to their climate?
    7·1 answer
  • 2). If you record a wave going 4m/s and the Period of the wave was<br> 60s, how long was the wave?
    14·1 answer
  • Solve the inequality 2(n+3) – 4&lt;6. Then graph<br> the solution.
    14·1 answer
  • A crane lifts a 425 kg steel beam vertically upward a distance of 66 m. How much work does the crane do on the beam if the beam
    11·1 answer
  • If light moves at a speed of 299,792,458 m/s, how long will it take light to move a distance of 1,000 km
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!