Suppose there are only two possible states of the world that could occur with equal probability. There are two assets (both risky). In the first state, asset 1 pays out $3 and asset 2 pays out $1. In the second state, asset 1 pays out $2 and asset 2 pays out $4. The investor is an expected utility maximizer with a log utility function. Solve for the optimal allocation of wealth to each asset.
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