t 2 Chapter 76 Seved Greta has risk aversion of A-5 when applied to return...
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t 2 Chapter 76 Seved Greta has risk aversion of A-5 when applied to return on wealth over a one-year horizon She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one year strategies. (All rates are annual and continuously compounded) The S&P 500 Tisk premium is estimated at % per year, with a standard deviation of 20%. The hedge fund risk premium is estimated at to with a Standard deviation of 35% The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also unconelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual return on the S&P 500 and the hedge fund retum in the same year is zero, but Gretas not fully conviced by this claim What should be Grea's capital allocation? (Do not round your intermediate calculations. Round your answers to 2 decimal places) Hadee Riska
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