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The following are estimates for two stocks
The following are estimates for two stocks.
| Stock | Expected Return | Beta | Firm-specific standard deviation |
| A | 13% | 0.8 | 30% |
| B | 18% | 1.2 | 40% |
Using the two assets above, assuming that the coefficient of risk aversion (A) and the correlation of the two assets are 4 and 0.6, respectively, find the portfolio that maximizes the individual’s utility given: U=E(rp)-(1/2)Aδ2p
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