An investors utility function is Ui(a) = 3x 1/2 x 2 Act a1 has x 5
Question:
An investor’s utility function is
Ui(a) = 3x – 1/2 σx 2
Act a1 has x 5 0.88, s 2 x 5 0.512, yielding Ui (a1) 5 2.384. Act a2 has x 5 0.80.
What σx2 would this act require to yield the same utility as a1? Explain the result using the concepts of risk and expected return.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 50% (16 reviews)
For a 2 to yield the same utility as a 1 we must have ...View the full answer
Answered By
Utsab mitra
I have the expertise to deliver these subjects to college and higher-level students. The services would involve only solving assignments, homework help, and others.
I have experience in delivering these subjects for the last 6 years on a freelancing basis in different companies around the globe. I am CMA certified and CGMA UK. I have professional experience of 18 years in the industry involved in the manufacturing company and IT implementation experience of over 12 years.
I have delivered this help to students effortlessly, which is essential to give the students a good grade in their studies.
3.50+
2+ Reviews
10+ Question Solved
Related Book For
Question Posted:
Students also viewed these Accounting questions
-
The relationship between risk and expected return is typically described as linear (e.g. the Security Market Line or SML). What is the relationship in terms of the slope of the SML? Why is this...
-
A solid-state camera system has 512 x 512 picture elements. All pixels are converted sequentially by an ADC and read into the frame buffer for processing. The machine vision system will operate at...
-
A1 and A2 represent ammeters with negligible resistance. What are the values of the currents? (a) In A1 (b) In A2? 2.00 10.0 2.00 > 3.00 12> 6.0012 2.00
-
Another liability that employers have is that of unemployment insurance. Class, let's talk about this a little more. At what levels are unemployment liabilities incurred? What are some additional...
-
A steady-flow combustion chamber is supplied with CO gas at 560 R and 16 psia at a rate of 12.5ft3/min and with oxygen (O2) at 537 R and 16 psia at a rate of 0.7 lbm/ min. The combustion products...
-
Suppose that trees are distributed in a forest according to a two-dimensional Poisson process with parameter a, the expected number of trees per acre, equal to 80. a. What is the probability that in...
-
When small particles of diameter \(d\) are transported by a moving fluid having a velocity \(V\), they settle to the ground at some distance \(\ell\) after starting from a height \(h\) as shown in...
-
The following figure depicts the financial situation of Jane Fawn. In period 0, her labour income and current consumption are $50; later, in period 1, her labour income and consumption will be $44....
-
1- Describe the error in the following code excerpt. for (int i = 1; i = 10; i++) System.out.println("This is the loop body"); 2- Change the code such that when it runs, the print statement is...
-
Suppose Sam runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Sam's total...
-
What would the utility function of a risk- taking investor look like? What sort of portfolio would such an individual be likely to invest in? What information would the investor need?
-
The Conceptual Framework states: Accrual accounting depicts the effects of transactions and other events and circumstances on a reporting entitys economic resources and claims in the periods in which...
-
In Exercises (a) find the slope of the curve at x = a. (b) Describe what happens to the tangent at x = a as a changes. y = x 2 + 2
-
What is meant by economic loss?
-
Describe the differing points of view taken in equitable estoppel and injurious reliance.
-
What constitutes false imprisonment?
-
What must a plaintiff prove in order to succeed in an action based on negligence?
-
Describe how one important defect in the consideration rules has been remedied by statute in five of the provinces.
-
What is an intermediate target? Why does the Fed use intermediate targets instead of focusing on the ultimate targets? What is an operating target?
-
Create an appropriate display of the navel data collected in Exercise 25 of Section 3.1. Discuss any special properties of this distribution. Exercise 25 The navel ratio is defined to be a persons...
-
Martinez Company incurred the following costs during 2015 in connection with its research and development activities. Instructions Compute the amount to be reported as research and development...
-
Discuss how a company's primary financial statements are useful to potential investors who are trying to decide whether to buy stock in the company. Support your discussion by citing objectives...
-
Sometimes a business entity changes its method of accounting for certain items. The change may be classified as a change in accounting principle, a change in accounting estimate, or a change in...
-
Sometimes a business entity changes its method of accounting for certain items. The change may be classified as a change in accounting principle, a change in accounting estimate, or a change in...
-
sked byChina699 BEMIDJI STATE UNIVERSITY Department of Technology, Art & Design TADT 3217 : Materials Science & Metallurgy Hardness Testing [A continued look at the Heat Treatment of Steel] ...
-
1. Advocate Aurora Sheboygan Memorial Hospital health care product or service to be marketed in your community. 2. Conduct appropriate market research in your community to determine the demographics...
-
How do ethical leaders integrate ethical considerations into strategic decision-making processes, balancing short-term business objectives with long-term ethical imperatives to ensure sustainable...
Study smarter with the SolutionInn App