Assume a utility function of ? = ?[?] − 1 ?? 2. Which statement(s) is/are correct about investors with this utility function? [I] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher risk premium [II] An investor with a higher degree of risk aversion chooses the optimal portfolio with lower risk [III] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher sharpe ratio [IV] The extent to which the investor dislikes risk is captured by ? 2 A. [II] only B. [I], [II] only C. [III] , [IV] only D. [II], [IV] only E. [I], [II], [III] only
Assume a utility function of ? = ?[?] − 1 ?? 2. Which statement(s) is/are correct about investors with this utility function? [I] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher risk premium [II] An investor with a higher degree of risk aversion chooses the optimal portfolio with lower risk [III] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher sharpe ratio [IV] The extent to which the investor dislikes risk is captured by ? 2 A. [II] only B. [I], [II] only C. [III] , [IV] only D. [II], [IV] only E. [I], [II], [III] only
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13QTD
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Assume a utility function of ? = ?[?] − 1 ?? 2. Which statement(s) is/are correct about investors with this utility function?
[I] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher risk premium
[II] An investor with a higher degree of risk aversion chooses the optimal portfolio with lower risk
[III] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher sharpe ratio
[IV] The extent to which the investor dislikes risk is captured by ? 2
A. [II] only
B. [I], [II] only
C. [III] , [IV] only
D. [II], [IV] only
E. [I], [II], [III] only
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