Refer the table below on the average risk premium of the S&P 500 over T-bills...
60.1K
Verified Solution
Link Copied!
Question
Finance
Refer the table below on the average risk premium of the S&P 500 over T-bills and the standard deviation of that risk premium Suppose that the S&P 500 is your risky portfolio Average Annual Returns S&P 500 Portfolio Risk S&P 500 Period Portfolio T-Bills 1-Month Standard Sharpe 1926-2015 1992-2015 1970-1991 1948-1969 1926-1947 10.79 12.87 14.14 9.25 3.47 2.66 7.54 2.70 0.91 Premium Deviation Ratio 0.40 0.44 0.29 0.65 0.30 8.30 8.13 5.33 11.44 8.33 20.59 18.29 18.20 17.67 27.99 a. If your risk-aversion coefficient is A 2.6 and you believe that the entire 1926-2015 period is representative of future expected performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is U /) _ 0.5 x . (Do not round intermediate calculations. Round your answers to 2 decimal places.) T-bills Equity b. If your risk-aversion coefficient is A 2.6 and you believe that the entire 1970-1991 period is representative of future expected performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? (Do not round intermediate calculations. Round your answers to 2 decimal places.) T-bills Equity
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!
