23. The certainty equivalent rate of a portfolio is a. the rate that a risk free investment would need to offer with certainty to be considered equally attractive as the risky portfolio. b. the rate that the investor must earn for certain to give up the use of his or her money. c. the minimum rate guarteed by institutions such as banks. d. the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk averse investors. e. represented by the scaling factor "-.005' in the utility function
23. The certainty equivalent rate of a portfolio is a. the rate that a risk free investment would need to offer with certainty to be considered equally attractive as the risky portfolio. b. the rate that the investor must earn for certain to give up the use of his or her money. c. the minimum rate guarteed by institutions such as banks. d. the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk averse investors. e. represented by the scaling factor "-.005' in the utility function
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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23. The certainty equivalent rate of a portfolio is
a. the rate that a risk free investment would need to offer with certainty to be considered equally attractive as the risky portfolio.
b. the rate that the investor must earn for certain to give up the use of his or her money.
c. the minimum rate guarteed by institutions such as banks.
d. the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk averse investors.
e. represented by the scaling factor "-.005' in the utility function
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