return. What is the maximum level of risk aversion for which the risky portfolio is still preferred to T-bills? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Maximum level of risk aversion must be less than

return. What is the maximum level of risk aversion for which the risky portfolio is still preferred to T-bills? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Maximum level of risk aversion must be less than

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2P: APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

Consider a portfolio that offers an expected rate of return of 9% and a standard deviation of 26%. T-bills offer a risk-free 2% rate of
return.
What is the maximum level of risk aversion for which the risky portfolio is still preferred to T-bills?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Maximum level of risk aversion must be
less than

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