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Unformatted text preview: He may purchase as many units as he wishes, up to $3million. a. What is the expected rate of return on his investment if he buys u units of rain insurance? (the cost of the insurance is in addition to his $1million investment) b. What number of units will minimise the variance of his return? What is this minimum value? And what is the corresponding expected rate of return? [ Hint : before calculating a general expression for variance, think about a simple answer]...
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This note was uploaded on 11/09/2010 for the course FINC 2012 taught by Professor Andrew during the Three '10 term at University of Sydney.
 Three '10
 Andrew

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