hard · Quantitative Finance
An allocator uses the Merton portfolio problem framework for an investor with a relative risk aversion of γ = 4.
If the risky asset has an excess return (μ - r) of 7% and a volatility of 20%, what percentage of wealth should be held in the risky asset?
- 43.75%
- 87.50%
- 35.00%
- 17.50%
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