Treasury bills are paying a 4% rate of return. A risk-averse investor with a risk aversion of A = 3 should invest entirely in a risky portfolio with a standard deviation of 24% only if the risky portfolio's expected return is at least ________.
A) 8.67%
B) 9.84%
C) 21.28%
D) 14.68%

Question

Quizplus · Accepted Answer

A = 11eaaae8_8b6a_fa95_a4b8_e7f62753f74a_TB6474_11 3 = 11eaaae8_8b6a_fa96_a4b8_2fd5e2bb042f_TB6474_11 3 × .0576 = E(r_p) − .04 E(r_p) = .1728 + .04 = 21.28%

Treasury Bills Are Paying a 4% Rate of Return