Which describes a curve in theplane as claimed G2=A(μ-4}+o Where -(n-oy-2m+)=Bon-+2-pn0 A 1 and oo-p2） —≥0 ORI-OR2)+2(1-P)R1OR2 Further =HaC -(m+e)Donon+n (oR1-O2P+20-P)bR10R2 Determining the optimal portfolio Now let's consider which portfolio in the efficient set is best.To do this we need to consider the investor's tolerance for risk. Let's consider one particular investor and let's suppose that this investor is able sign a number U(Fg)to each possible investment return distribution Fg with 1.U(FR)>U(Fgb)if and only if the investor prefers the investment with return Ra to the investment with return R. 2.U(Fga)=U(Fgp)if and only if the investor is indifferent to choosing between the investment with return Ra and the investment with return Rp U(Fg)=u-ka' Where k>0 is a number that measures the investor's level of risk aversion and aversion and is unique to each investor. Maximize:U(Fg)=u-ko? Subjeet to:2=Au+ Solution 1 。=4依+时 x=-4 L1-42Which describes a curve in the  R −  R plane as claimed ( ) 2 0 2 0 2  = A  −  + Where ( ) ( 2 ) ( ) 2(1 )  0 1 1 2 2 1 2 2 1 2 2 2 2 1 1 2 − + = − + −  − = R R R R R R R R R R A     B        and ( ) ( ) ( ) 0 2 1 1 1 2 2 1 2 2 22 2 2 2 1 0  − + − − = R R R R R R          Further ( ) ( ) ( ) 1 2 2 1 2 2 1 2 1 2 2 1 2 1 2 0 R R 2 1 R R R R R R R R R R               − + − − + + = Determining the optimal portfolio Now let’s consider which portfolio in the efficient set is best. To do this we need to consider the investor’s tolerance for risk. Let’s consider one particular investor and let’s suppose that this investor is able to assign a number U(FR) to each possible investment return distribution FR with the following properties: 1. U(FRa)>U(FRb) if and only if the investor prefers the investment with return Ra to the investment with return Rb. 2. U(FRa)=U(FRb) if and only if the investor is indifferent to choosing between the investment with return Ra and the investment with return Rb. ( ) 2 U FR =  − k Where k>0 is a number that measures the investor’s level of risk aversion and aversion and is unique to each investor. Maximize: ( ) 2 U FR =  − k Subject to: ( ) 2 0 2 0 2  = A  −  + Solution 2 2 0 * 4 1  = + Ak 1 2 2 * R R R x     − − =