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Unformatted text preview: c. Consider two assets, one with a certain return of 5%, and a risky asset with a 30% probability of a 2% return, and a 70% probability of a 10% return. Assuming a logarithmic expected utility function, and an initial wealth of $100,000, how much of their wealth should the household hold in the risky asset? (To do this, you first need to put down the general problem, and utilize the FOC to calculate the optimal share.)\ Question 2 Question 3 Question 4...
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- Fall '10