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QUESTION
Your optimal balanced portfolio consists of an optimal risky portfolio with expected return of 20% and standard deviation of returns of 10% and a...
Your optimal balanced portfolio consists of an optimal risky portfolio with expected return of 20% and standard deviation of returns of 10% and a risk-free asset with expected return of 4%. Your level of risk aversion is 8. What is the proportion of funds allocated to the optimal portfolio of risky assets (y*)?The answer is 200%.
Can someone explain how to get it?
