1. Mark is an active portfolio manager at a money management firm focusing exclusively on long equities. David is the risk manager for the firm.

	Portfolio 1	Portfolio 2	Portfolio 3
Expected Return	3.2%	6.4%	5.4%
Standard Dev	1.0%	2.0%	5.0%

1. Mark is adamant that the firm invest in Portfolio 3 while David is pushing for Portfolio 2. What is Mark’s risk preference? Why? What is David’s risk preference? Why?
2. In making a choice between Portfolio 1 and Portfolio 2, Mark is adamant about Portfolio 2, while David is indifferent between Portfolio 1 and Portfolio 2. Who is exhibiting rational investor behavior? Why?

Answer rating: 100% (QA)

Marks risk preference can be inferred based on his preference for Portfolio 3 which has the highest ... View the full answer