# Question

Consider the following three investments. Which are preferred if U(W) = W -(1/2)W2?

## Answer to relevant Questions

Assume the utility function is U(W) = -W-1/2. What is the preferred investment in Problem 1? In Problem 1 If RL equals 5%, what is the preferred investment shown in Problem 1 using Roy’s safety-first criterion? In Problem 1 Consider the following returns: What is the average return in each market from the point of view of a U.S. investor and of a U.K. investor? Consider the CAPM line shown below. What is the excess return of the market over the risk-free rate? What is the risk-free rate? Given the following situation: Draw the minimum variance curve and efficient frontier in expected return standard deviation space. Be sure to give the coordinates of all key points. Draw the security market line.Post your question

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