CONNECT WITH LEARNSMART FOR BODIE: ESSE
CONNECT WITH LEARNSMART FOR BODIE: ESSE
11th Edition
ISBN: 9781265046392
Author: Bodie
Publisher: MCG
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Chapter 5, Problem 4CP

Use the following data in answering CFA Questions 4-6.
Investment Expected Return,Standard Deviation, 6

10. 120.30

20. 10.50

30. 210.16

4. 0.24 0.21
Suppose investor “satisfaction” with a portfolio increases with expected return and decreases with variance according to the following “utility” formula: U = E® − ½ A2where A denotes the investor’s risk aversion.
4. Based on the formula for investor satisfaction or “utility,” which investment would you select if you were risk averse with A = 4? (LO 54)

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CONNECT WITH LEARNSMART FOR BODIE: ESSE

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