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Capital Allocation. Optimal Captial Allocation using Maximum Utility
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Capital Allocation > Asset Classes Allocation > Security Selection
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Risky Pf (P) only
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rf: rate of return of risk-free asset7%
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E(Rp): expected return of risky pf15%
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𝜎 p: SD of risky pf22%
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Complete Pf (C). Risk free + Risky Pf
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y: weight of risky pf - Solver
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1-y: weight of risk free asset 1,00
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E(rc): expected return of the Complete pf7,00%
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𝜎 c: SD of Complete pf0,00%
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Slope: Capital Allocation Line (CAL) 0,36
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U (A=4): Utility at the risk aversion level 7,00000%
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Max. Objective
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Under Max. Utility8,65289%
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weight of risky pf: yE(rc)𝜎 cU=E(rc)-1/2A𝜎c^2E(rc)
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07,00%0,00%7,00%8,65%
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0,17,80%2,20%7,70%8,75%
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0,28,60%4,40%8,21%9,04%
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0,39,40%6,60%8,53%9,52%
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0,410,20%8,80%8,65%10,20%
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0,511,00%11,00%8,58%11,07%
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0,611,80%13,20%8,32%12,14%
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0,712,60%15,40%7,86%13,40%
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0,813,40%17,60%7,20%14,85%
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0,914,20%19,80%6,36%16,49%
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1,015,00%22,00%5,32%18,33%
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y=0=C12=C13=C15
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