Greta has tisk aversion of A=4 and a 1.year imestment horizon. She is pondering two...
80.2K
Verified Solution
Link Copied!
Question
Finance
Greta has tisk aversion of A=4 and a 1.year imestment horizon. She is pondering two pontfolios, the S\&P 500 and a hedqe fund, as well as o number of Iyear strategies. (All rates are annual and continuously compounded) The S\&P 500 risk premum is estimoted at 7% pet year, with a standard devlation of 18%. The hedge fund risk premium is estimated at 1225 with a standard deviation of 33%. The returnis as both of these portfollos in any particular year are uncorrelated with its own retums in other years. They are also uncoirelated with the returns of the other portfolio in other yeas. The hedge fund claims the conelation coeflicient between the annual rettan on the S\&P 500 and the hedge fund return in the same year is zero, but Greta is not lully convinced by this claim. What should be Greta's captail aflocation? Note: Do not round your intermedlete calculations. Round your onswers to 2 decimal ploces
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
