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2. Consider an investor with preference for the mean and variance of the returns on...

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Accounting

2. Consider an investor with preference for the mean and variance of the returns on a portfolio. Let be the share of the investors wealth allocated to the risky asset and 1 be the share allocated to the riskfree asset. The risk-free asset yields return f, and the risky asset yields return r with its variance r2. The investors risk coefficient is assumed to be positive ( > 0). If the investor maximizes the certainty equivalent, what is the optimal choice of ?

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