4 Refer the table below on the average excess return of the U.S. equity market and the standard deviation of that excess return.Suppose that the U.S. market is your risky portfolio.U.S. Equity MarketStandardAverage Annual Returns1-MonthExcessSharpePeriodU.S. equityT-BillsreturnDeviationRatio1927-201811.773.388.3420.360.419.4014.0013.381927-19490.928.4926.830.321950-19723.1410.8617.460.621973–19951996-20180.330.437.266.1118.4310.102.217.8918.39a. If your risk-aversion coefficient is A = 4.9 and you believe that the entire 1927–2018 period is representative of future expectedperformance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is u- E(r) - 0.5 x Ao2. (Do not round intermediate calculations. Round your answers to 2 decimal places.)T-bills%Equity%b. If your risk-aversion coefficient is A = 4.9 and you believe that the entire 1973–1995 period is representative of future expectedperformance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)T-bills%Equity%

The question is based on the concept of portfolio theory and management. The portfolio is a…

Answered: Refer the table below on the average…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 15P

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