Risk tolerance (tk)ofShailendra is 50 . He is considering investment in one of the following portfolios. His utility curve is U = E(r) – (si2 /tk) Portfolio A Portfolio B Portfolio C Expected return (%) Probability Expected return (%) Probability Expected return (%) Probability 7 0.40 8 0.20 9 0.10 8 0.20 9 0.20 11 0.10 9 0.20 10 0.20 12 0.20 10 0.10 12 0.10 13 0.30 12 0.10 13 0.30 14 0.30 Assuming Mr. Shailendra is a moderately risk averse investor, Which portfolio he should invest in?
Risk tolerance (tk)ofShailendra is 50 . He is considering investment in one of the following portfolios. His utility curve is U = E(r) – (si2 /tk) Portfolio A Portfolio B Portfolio C Expected return (%) Probability Expected return (%) Probability Expected return (%) Probability 7 0.40 8 0.20 9 0.10 8 0.20 9 0.20 11 0.10 9 0.20 10 0.20 12 0.20 10 0.10 12 0.10 13 0.30 12 0.10 13 0.30 14 0.30 Assuming Mr. Shailendra is a moderately risk averse investor, Which portfolio he should invest in?
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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Risk tolerance (tk)ofShailendra is 50 . He is considering investment in one of the following portfolios. His utility curve is U = E(r) – (si2 /tk)
|
Portfolio A |
Portfolio B |
Portfolio C |
|||
|
Expected return (%) |
Probability |
Expected return (%) |
Probability |
Expected return (%) |
Probability |
|
7 |
0.40 |
8 |
0.20 |
9 |
0.10 |
|
8 |
0.20 |
9 |
0.20 |
11 |
0.10 |
|
9 |
0.20 |
10 |
0.20 |
12 |
0.20 |
|
10 |
0.10 |
12 |
0.10 |
13 |
0.30 |
|
12 |
0.10 |
13 |
0.30 |
14 |
0.30 |
Assuming Mr. Shailendra is a moderately risk averse investor, Which portfolio he should invest in?
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