Chapter6: Risk And Return
Section6.7: The Relationship Between Risk And Return In The Capital Asset Pricing Model
Problem 2ST
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This question relates to Diagram 5 from the 9.2 diagrams, which shows four different feasible portfolios plotted on a set of risk/return axes.
Which portfolio would a risk-averse investor prefer - Portfolio A or Portfolio G?
Select one:
a.
Portfolio A.
b.
Portfolio G.
c.
The investor would be indifferent between the two portfolios.
d.
We cannot tell without more information about the investors attitude towards risk (i.e. how risk-averse the investor is).
![DIAGRAM 5
Expected return (%)
В
G
A
Standard deviation
of returns (%)
DIAGRAM 6
Expected return (%)
Standard deviation
of returns (%)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa91ce4a9-9b38-4351-81ef-ed2c686e541f%2F05f01cff-ab80-4b72-8dcf-f11a9d8c6b95%2Fugk61wl_processed.png&w=3840&q=75)
Transcribed Image Text:DIAGRAM 5
Expected return (%)
В
G
A
Standard deviation
of returns (%)
DIAGRAM 6
Expected return (%)
Standard deviation
of returns (%)
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