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Asked by Bryan Cakir on May 28, 2024

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Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 and co-ownership of the business, which has a rate of return of Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 and a level of risk of Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 . Donna's marginal rate of substitution of return for risk Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 where Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 is Donna's portfolio rate of return and σP is her optimal portfolio risk. Donna's budget constraint is given by Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 Solve for Donna's optimal portfolio rate of return and risk as a function of Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 , Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 and Donna is considering the option of becoming a co-owner in a business. Her investment choices are to hold a risk free asset that has a return of and co-ownership of the business, which has a rate of return of and a level of risk of . Donna's marginal rate of substitution of return for risk where is Donna's portfolio rate of return and σ<sub>P</sub><sub> </sub>is her optimal portfolio risk. Donna's budget constraint is given by Solve for Donna's optimal portfolio rate of return and risk as a function of , and . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk. Investment Rate of Return Risk Risk Free 0.06 0 Business 0.25 0.39 . Suppose the table below lists the relevant rates of returns and risks. Use this table to determine Donna's optimal rate or return and risk.
Investment Rate of Return Risk
Risk Free 0.06 0
Business 0.25 0.39

Risk Free Asset

An investment that is expected to return its original value without any loss and with a certain rate of interest; considered to have zero default risk.

Rate of Return

The increase or decrease in the value of an investment during a set time frame, represented as a proportion of the investment's original price.

Level of Risk

The degree of uncertainty associated with an investment or decision, often regarding the potential for loss.

  • Implement the principle of utility maximization when choosing portfolios.
  • Gain insight into how standard deviation functions as an indicator of risk in portfolios composed of risk-bearing and risk-free assets.
  • Appraise financial decision-making using the marginal rate of substitution (MRS) to improve the allocation of resources in a portfolio.
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GM
Gabriela MonserratJun 02, 2024
Final Answer :
To find Donna's optimal portfolio return and portfolio risk, we need to first equate the slope of her indifference curve to the slope of her budget constraint. This implies To find Donna's optimal portfolio return and portfolio risk, we need to first equate the slope of her indifference curve to the slope of her budget constraint. This implies We may then substitute this level of portfolio risk into her budget constraint to find her optimal rate of return We can plug this optimal portfolio return into the expression for portfolio risk above and get: Using the values from the table, we see that Donna's optimal portfolio return is Donna's optimal portfolio risk is We may then substitute this level of portfolio risk into her budget constraint to find her optimal rate of return To find Donna's optimal portfolio return and portfolio risk, we need to first equate the slope of her indifference curve to the slope of her budget constraint. This implies We may then substitute this level of portfolio risk into her budget constraint to find her optimal rate of return We can plug this optimal portfolio return into the expression for portfolio risk above and get: Using the values from the table, we see that Donna's optimal portfolio return is Donna's optimal portfolio risk is We can plug this optimal portfolio return into the expression for portfolio risk above and get: To find Donna's optimal portfolio return and portfolio risk, we need to first equate the slope of her indifference curve to the slope of her budget constraint. This implies We may then substitute this level of portfolio risk into her budget constraint to find her optimal rate of return We can plug this optimal portfolio return into the expression for portfolio risk above and get: Using the values from the table, we see that Donna's optimal portfolio return is Donna's optimal portfolio risk is Using the values from the table, we see that Donna's optimal portfolio return is To find Donna's optimal portfolio return and portfolio risk, we need to first equate the slope of her indifference curve to the slope of her budget constraint. This implies We may then substitute this level of portfolio risk into her budget constraint to find her optimal rate of return We can plug this optimal portfolio return into the expression for portfolio risk above and get: Using the values from the table, we see that Donna's optimal portfolio return is Donna's optimal portfolio risk is Donna's optimal portfolio risk is To find Donna's optimal portfolio return and portfolio risk, we need to first equate the slope of her indifference curve to the slope of her budget constraint. This implies We may then substitute this level of portfolio risk into her budget constraint to find her optimal rate of return We can plug this optimal portfolio return into the expression for portfolio risk above and get: Using the values from the table, we see that Donna's optimal portfolio return is Donna's optimal portfolio risk is

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