Mean variance utility defines risk using certainty equivalent wealth. The lower the certainty equivalent wealth, the lower the mean variance utility.

uestion

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O True

O False

Under constant relative risk aversion, the lower the certainty equivalent wealth is than the average wealth of a lottery the riskier the lottery.

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O True

O False

Given a normally distributed risky asset and a risk free asset, a person with a lower CRRA risk aversion coefficient will put less in the risk free asset than a person with a higher CRRA risk aversion.

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O True

O False

Greater risk aversion means a plot of utility vs. wealth would look less curved.

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O True

O False

The greater the wealth, the less the utility of the next dollar of wealth.

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O True

O False

People don't like risk because it means they get poorer when they're poorer and richer when they're rich. In fact, a financial security that does the opposite of that would be negatively risky and be even better than risk free.

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O True

O False

People don't like risk because it is uncertain. Certain things are always preferable to uncertain things.

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O True

O False

Given the opportunity to buy a 50% at $2 for $1, most people would be indifferent

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O True

O False