Calculate the expected utility of each prospective portfolio for each of the two clients.

QUESTION

As the chief investment officer for a money management firm specializing in taxable individual investors, you are trying to establish a strategic asset allocation for two different clients. You have established that Ms. A has a risk-tolerance factor of 8 while Mr. Bs risk-tolerance factor is 27. The characteristics for four model portfolios follow:

ASSET MIX

Portfolio

Stock

Bond

 

ANSWER:

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