Consider a portfolio that offers an expected rate of return of 11% and a standard deviation of 21%. T-bills offer a risk-free 6% rate of return. What is the maximum level of risk aversion for which the risky portfolio is still preferred to T-bills?

The  level of risk aversion must be less than 2.27 for the risky portfolio to be preferred to bills.

Explanation:

Let U presents utility level. Therefore, we can specify U as follows:

U = E(r) - (0.5 * A * SD^2) (1)

Where, risky portfolio, we have:

E(r) = expected rate of return = 11%, or 0.11

SD = Standard deviation = 21%, or 0.21

A = Level of risk aversion = ?

Substituting the values into equation (1), we have:

U of risky portfolio = 0.11 - (0.5 * A * 0.21^2)

U of risky portfolio = 0.11 - (A * 0.02205)

Since the T-bills offer a risk-free 6% rate of return, it therefore implies that:

U of T-bill = 6%, 0.06

Therefore, the following must hold for the risky portfolio to be preferred to bills:

U of risky portfolio > U of T-bill (2)

Substituting the values for the expression above and solve for A, we have:

0.11 - (A * 0.02205) > 0.06

-(A * 0.02205) > 0.06 - 0.11

-(A * 0.02205) > - 0.05

Divide through by -1 and change the inequality sign, we have:

A * 0.02205 < 0.05

A < 0.05 / 0.02205

A < 2.27

Therefore, the  level of risk aversion must be less than 2.27 for the risky portfolio to be preferred to bills.

answer; ///(d); determining who competes most closely   with whom evaluating whether industry driving forces and competitive pressure favor some strategic groups and hurt others, and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each groups respective market positions;