# Question

Consider the choice shown in Problem 3. The probability of a $5 return is 1/2 and of a $12 return is 1/4. How much would these probabilities have to change so that the investor is indifferent between investments A and B?

In Problem 3

In Problem 3

## Answer to relevant Questions

Consider the following investments. Which is preferred if U(W) = W - 0.05W2? Using geometric mean return as a criterion, which investment is to be preferred in Problem 1? In Problem 1 What is the standard deviation of return from the point of view of a U.S. and a Japanese investor? Assume that an asset exists with (R-bar)3 = 15% and β3 = 1.2. Further assume the security market line discussed in Problem 1. Design the arbitrage opportunity. If (R-bar)M = 15% and RF = 5% and risk-free lending is allowed but riskless borrowing is not, sketch what the efficient frontier might look like in expected return standard deviation space. Sketch the security market line ...Post your question

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