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This is an insurance question regarding Mean Standard Deviation graph, use the knowledge to provide...

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Accounting

This is an insurance question regarding Mean Standard Deviation graph, use the knowledge to provide an answer in terms of R.

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Olivia is an investor who has only two primary assets, asset A and asset B, in which to hold her wealth, which is normalised to be 1. Asset A has mean mA=4 and standard deviation A=2, while asset B has mean mB=2 and standard deviation B=1. Olivia can choose as her portfolio any mixture between the two assets defined by , where is the fraction of her wealth that is held in asset A (so a fraction 1 is held in asset B ). Portfolios are restricted to satisfy 01. Olivia has constant absolute risk aversion preferences, with absolute risk aversion parameter equal to R, and her expected utility of a portfolio with mean m and standard deviation is given by v(m,)=m2a2R. Olivia makes her portfolio decisions maximising this function. 4. Finally, now assume for this question and the next one that AB=0. (a) Find the equation for the efficient portfolio curve. (b) Find Olivia's optimal investment strategy , and the coordinates of her optimal portfolio, (m,). (c) If R=23, what is Olivia's optimal portfolio? What is Olivia's level of expected utility at her optimal portfolio

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