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2016 4c) An investor has preferences over portfolios that can be expressed as a function of

expected return (m) and portfolio variance (s2) only: U (m, s2) = m − 0.8 s2. The risk free rate of
return is 3% and the average return on the market index is 8%. The standard deviation of the market
index is 30%. What is the optimal portfolio for the investor?

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