Greta has risk aversion of A = 5 when applied to return on wealth over a one-year horizon. She is pondering two portfoli

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Greta has risk aversion of A = 5 when appliedto return on wealth over a one-year horizon. She is pondering twoportfolios, the S&P 500 and a hedge fund, as well as a numberof 5-year strategies. (All rates are annual and continuouslycompounded.) The S&P 500 risk premium is estimated at 7% peryear, with a standard deviation of 19%. The hedge fund risk premiumis estimated at 11% with a standard deviation of 34%. The returnson both of these portfolios in any particular year are uncorrelatedwith its own returns in other years. They are also uncorrelatedwith the returns of the other portfolio in other years. The hedgefund claims the correlation coefficient between the annual returnon the S&P 500 and the hedge fund return in the same year iszero, but Greta is not fully convinced by this claim.Compute the estimated 1-year risk premiums, standard deviations,and Sharpe ratios for the two portfolios. (Do notround your intermediate calculations. Round "Sharpe ratios" to 4decimal places and other answers to 2 decimalplaces.)