Investment Expected Return Standard Deviation 1 0.12 0.30 2 0.15 0.50 3 0.21 0.16 4 0.24 0.21 Based on the utility formula we covered in lectures, a. Calculate the utility of each investment alternative for an investor with risk averse A=4: The utility of Investment 1 The utility of Investment 2 The utility of Investment 3 The utility of Investment 4 b. State which investment you would select if you were risk averse with A=4: Blank 5. Fill in the blank, read surrounding text. c. State which investment you would select if you were risk averse with A=2: Blank 6. Fill in the blank, read surrounding text.
Investment Expected Return Standard Deviation
1 0.12 0.30
2 0.15 0.50
3 0.21 0.16
4 0.24 0.21
Based on the utility formula we covered in lectures,
a. Calculate the utility of each investment alternative for an investor with risk averse A=4:
The utility of Investment 1
The utility of Investment 2
The utility of Investment 3
The utility of Investment 4
b. State which investment you would select if you were risk averse with A=4: Blank 5. Fill in the blank, read surrounding text.
c. State which investment you would select if you were risk averse with A=2: Blank 6. Fill in the blank, read surrounding text.
.
d. State which investment you would select if you were risk neutral: Blank 7. Fill in the blank, read surrounding text.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
