Suppose that there is an investor, whose risk aversion coefficient is 4 and her utility function...
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Suppose that there is an investor, whose risk aversion coefficient is 4 and her utility function is U = E(r) - ². There are two stocks A and B, where stock A's expected return is 0.3 and its standard deviation is 0.3. Below figure draws this investor's indifference curve and plots the stocks A and B. Which of the following statements can be true? E(r) B A This investor's utility from investing in Stock A is lower than from investing in Stock B. Stock B's expected return is 0.44 and standard deviation is 0.4. Stock B's pected return is 0.44 and standard deviation is 0.16. Stock B's expected return is 0.28 and standard deviation is 0.4. None of the above can be true. 0 Suppose that there is an investor, whose risk aversion coefficient is 4 and her utility function is U = E(r) - ². There are two stocks A and B, where stock A's expected return is 0.3 and its standard deviation is 0.3. Below figure draws this investor's indifference curve and plots the stocks A and B. Which of the following statements can be true? E(r) B A This investor's utility from investing in Stock A is lower than from investing in Stock B. Stock B's expected return is 0.44 and standard deviation is 0.4. Stock B's pected return is 0.44 and standard deviation is 0.16. Stock B's expected return is 0.28 and standard deviation is 0.4. None of the above can be true. 0
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Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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