Answer:
14.656%
Step-by-step explanation:
Data provided in the question:
Rate of return, r = 4% = 0.04
Risk aversion of A = 1.85
Standard deviation, σ = 24%
Now,
we have the relation
A = (E - r) ÷ σ²
E = expected return on portfolio
r = Risk free rate
on substituting the respective values, we get
1.85 = (E - 0.04) ÷ (0.24)²
or
0.0576 × 1.85 = (E - 0.04)
or
0.10656 + 0.04 = E
or
E = 0.14656 or
E = 0.14656 × 100% = 14.656%
Answer:
0.625
Step-by-step explanation:
