Ann has $10,000 to invest in a complete portfolio. You have provided her a risky...
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Ann has $10,000 to invest in a complete portfolio. You have provided her a risky portfolio with return of 10.5% and standard-deviation of 15%, and a risk-free asset with return equals to 4%. After comparison between the risky and risk-free asset, Ann generally prefers the risk-free asset, as she is risk-averse and the highest risk level she could accept is indifferent between risk-free and risky asset.
A) Calculate the minimum value of Ann's risk-aversion factor. Keep 3 decimals in your answer.
B) Using the minimum value of the risk-aversion factor you derived from A) and the information from the question, calculate the optimal weighting for the risk-free asset and the risky portfolio. Keep 3 decimals in your answer.
C) Using the weighting you derived from B) and the information from the question, calculate the return and risk of Ann's complete portfolio. Keep 3 decimals in your answer.
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