You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 35%. The T-bill rate is 5%. Your client’s degree of risk aversion is A = 2.2, assuming a utility function U = E(r) - ½Aσ².
a. What proportion, y, of the total investment should be invested in your fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)