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Hillary can invest her family savings in two assets: riskless Treasury bills or a risky vacation home real estate

project on an Arkansas river. The expected return on Treasury bills is 4 percent with a standard deviation of zero. The expected return on the real estate project is 30 percent with a standard deviation of 40 percent.

Refer to Scenario 5.10. Hillary says that she always would like to take 1 percent higher stadnard deviation as long as the expected return also is 1 percent higher. Giving her preference, how she should invest her saving?

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She should invest in... View the full answer

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