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QUESTION
Your financial advisor forecasts that the return of the SP 500 Index Portfolio over the next year will be 12%. According to her estimates, the...
Your financial advisor forecasts that the return of the S&P 500 Index Portfolio over the next year will be 12%. According to her estimates, the expected return for a one-year Treasury Bill is 4%. Based on recent performance, she estimates that the standard deviation of returns for the S&P 500 Index Portfolio will be 25%.
Assuming that you choose to invest in the S&P 500 Index Portfolio, what is your degree of risk aversion?
