Consider historical data showing that the average annual rate of return on the S&P 500 portfolio...

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Finance

Consider historical data showing that the average annual rate ofreturn on the S&P 500 portfolio over the past 85 years hasaveraged roughly 8% more than the Treasury bill return and that theS&P 500 standard deviation has been about 32% per year. Assumethese values are representative of investors' expectations forfuture performance and that the current T-bill rate is 4%.

Calculate the utility levels of each portfolio for an investorwith A = 3. Assume the utility function is U =E(r) ? 0.5 × A?². (Donot round intermediate calculations. Round your answers to 4decimal places.)

W_Bills
W_Index
U(A = 3)
0.0
1.0

0.2
0.8

0.4
0.6

0.6
0.4

1.8
0.2

0.1
0.0

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Consider historical data showing that the average annual rate ofreturn on the S&P 500 portfolio over the past 85 years hasaveraged roughly 8% more than the Treasury bill return and that theS&P 500 standard deviation has been about 32% per year. Assumethese values are representative of investors' expectations forfuture performance and that the current T-bill rate is 4%. Calculate the utility levels of each portfolio for an investorwith A = 3. Assume the utility function is U =E(r) ? 0.5 × A?2. (Donot round intermediate calculations. Round your answers to 4decimal places.) WBillsWIndexU(A = 3)0.01.0 0.20.8 0.40.6 0.60.4 1.80.2 0.10.0