The information contained in the table below shows the expected return and standard deviation for a risky asset and risk-free asset. Asset Expected Return Risk (Standard Deviation) Risky Asset 13.00% 27.00% Risk-Free Asset 2.50% 0.00% Coefficient of Risk Aversion 1.0 Required: Using the information in the tables above, determine the optimal allocation to the risky asset. Use the MIN functions to ensure no leverage is deployed.

The information contained in the table below shows the expected return and standard deviation for a risky asset and risk-free asset. Asset Expected Return Risk (Standard Deviation) Risky Asset 13.00% 27.00% Risk-Free Asset 2.50% 0.00% Coefficient of Risk Aversion 1.0 Required: Using the information in the tables above, determine the optimal allocation to the risky asset. Use the MIN functions to ensure no leverage is deployed.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.2: Elements Of Decision Analysis

Problem 3P

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Asset	Expected Return	Risk (Standard Deviation)
Risky Asset	13.00%	27.00%
Risk-Free Asset	2.50%	0.00%

Coefficient of Risk Aversion
1.0

Required:

Using the information in the tables above, determine the optimal allocation to the risky asset. Use the MIN functions to ensure no leverage is deployed.

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