You invest $2,000 in a risky asset with an expected rate of return of 0

Accounting Apr 06, 2022

You invest $2,000 in a risky asset with an expected rate of return of 0.13 (and a standard deviation of 0.20) and a T-bill with a rate of return of 0.03.

Knowing that the coefficient of risk aversion equals 5, to form a portfolio, what optimal percentages of your money must be invested in the risky asset and the risk-free asset, respectively?

choose correct option:

1.) 85% and 15%

2.) 50% and 50%

3.) 75% and 25%

4.) 57% and 43%

5.) Cannot be determined.