Problem Set 1

1 c suppose that you want to maximize the

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Unformatted text preview: ent? b) If you invest in N of these projects, what is the mean and the variance of the total profit? [Hint: Use the results from Question 1b]. 1 c) Suppose that you want to maximize the mean ­variance criterion E [ X ] " Var( X ) 2 (in terms of the class slides, we are assuming parameters α=1, β=½). Write down the mean ­variance criterion as a function of the number of projects N. ! d) How many projects should you invest if you want to maximize the mean ­va...
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