The optimal proportion of the risky asset in the complete portfolio is given by the equation y * = [E(r_P)-r_f]/(.01A * Variance of P).For each of the variables on the right side of the equation,discuss the impact of the variable's effect on y* and why the nature of the relationship makes sense intuitively.Assume the investor is risk averse.

Question

Quizplus · Accepted Answer

The Answer of The optimal proportion of the risky asset in the complete portfolio is given by the equation y * = [E(r_P)-r_f]/(.01A * Variance of P).For each of the variables on the right side of the equation,discuss the impact of the variable's effect on y* and why the nature of the relationship makes sense intuitively.Assume the investor is risk averse.

The Optimal Proportion of the Risky Asset in the Complete