Question: For an investor whose utility function is written as U = E(R) 2 2, the investment A has the following properties: E(RA) = 12% and

For an investor whose utility function is written as U = E(R) 2 2, the investment A has the following properties: E(RA) = 12% and sigmaA = 20%. Suppose that another investment, noted B, is located on the same indifference curve as the investment A of this investor. If E(RB) = 22%, then sigmaB should be equal to: Select one: a. 20% b. 25% c. 35% d. 30% e. 40%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

For an investor whose utility function is written as U = E(R) - 2(sigma)^2, the investment A has the following properties: E(RA) = 12% and sigmaa = 20%. Suppose that another investment, noted B, is...

Continuing with the same fund data: Year Total Return 2016 2% 2017 -12% 2018 10% 2019 18% 2020 -5% e. The standard deviation of the fund is 12%. If the US T-bill rate is 1%, and investors' utility...

Year Total Return 2016 2% 2017 -12% 2018 10% 2019 18% 2020 -5% The standard deviation of the fund is 12%. If the US T-bill rate is 1%, and investors utility functions follow the formula, U = E( r) A2...

Year Total Return 2016 2% 2017 -12% 2018 10% 2019 18% 2020 -5% The standard deviation of the fund is 12%. If the US T-bill rate is 1%, and investors utility functions follow the formula, U = E( r)...

Continuing with the same fund data: Year Total Return 2016 2% 2017 -12% 2018 10% 2019 18% 2020 -5% The standard deviation of the fund is 12%. If the US T-bill rate is 1%, and investors utility...

ag15 (10) Consider a consumer with preferences U = Z 1 0 e tu(ct)dt; where is the subjective discount rate, c is consumption, and u(c) = ln c. She receives an exogenous ow of income y and can borrow...

Problem 1 (10 marks) Three years ago, you purchased a bond for $974.69. The bond had three years to maturity, a coupon rate of 8% paid annually, and a face value of $1,000. Each year you reinvested...

QUESTION 3 You won $200M {$200,000,000} playing the lottery. Two charities have approached you for a donation. You summoned the directors of the two charities and informed them that they will play...

Question one. Chepa's utility function is given by U (x, y) = ln x + 4 ln y. Assume that Chepa has endowments (10, 10) and that Py = 10 throughout the problem. I need help with questions G) and H)...

Question 3 (35 points) (a) (12 points) Consider the CAPM model regression results for stock A and stock B: RA Rf = -1% +0.4(RM Rp) + fa, where RA is the return of stock A, RM is the return of the...

What are the pros and Cons of Participant observation and focus groups? What are the three most important things for each method that you think researchers need to keep in mind prior to doing the...

What is the present value of an annuity of $6,000 per year, with the first cash flow received four years from today and the last one received 18 years from today? Use a discount rate of 8 percent.

Inflation has an adverse effect on your savings because: 1 . It erodes the purchasing power of the dollars you have saved. 2 . It increases the real rate of return on the dollars you save. 3 . Unless...

Add "Viggo Mortenslet cast = new Map ( ) ;en " to the cast as the key, with value "Aragorn".