Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk. To identify: Utility level of an investor with A=3.

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Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

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Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 31% per year. Assume these values are representative of Investors' expectations for future performance and that the current T-bill rate is 3%. Calculate the utility levels of each portfolio for an Investor with A = 2. Assume the utility function is u = E(r) - 8.5 x Ao². Note: Do not round Intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be Indicated by a minus sign. W Bills 0.0 0.2 0.4 0.6 0.8 1.0 Windex 1.0 0.8 0.6 0.4 Oo 0.2 0.0 U(A = 2)

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 33% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%. Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign. - 0.5 × Ag². X Answer is complete but not entirely correct. WIndex U(A = 2) 0.0111 0.0504 0.0808 x 0.1026 0.1164 X 0.1200 X WBills 0.0 0.2 0.4 0.6 0.8 1.0 1.0 0.8 0.6 0.4 0.2 0.0

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 25% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%. Calculate the utility levels of each portfolio for an investor with A = 3. Assume the utility function is U = E(r) 0.5 x Ao2. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 4 decimal places.) WBills 0.0 0.2 0.4 0.6 0.8 1.0 Windex 1.0 0.8 0.6 0.4 0.2 0.0 U(A = 3) -

Answer 2

Question

Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

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Answer 3

Question

Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

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Answer 4

Question

Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

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Answer 5

Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

Answer 6

Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

Answer 7

Chapter 6, Problem 12PS

Summary Introduction

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

Answer 8

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Answer 9

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Answer 11

Ch. 6.A - Prob. 1P Ch. 6.A - Prob. 2P Ch. 6 - Prob. 1PS Ch. 6 - Prob. 2PS Ch. 6 - Prob. 3PS Ch. 6 - Prob. 4PS Ch. 6 - Prob. 5PS Ch. 6 - Prob. 6PS Ch. 6 - Prob. 7PS Ch. 6 - Prob. 8PS

Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk. To identify: Utility level of an investor with A=3.

Solution Summary: The author explains how the formula for calculating utility is:- Utility (U)=E(r)12A2 Weight of BillsWeight of IndexExpected return of portfolio Rp=t=1

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Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.

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Chapter 6 Solutions

Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk. To identify: Utility level of an investor with A=3.

Solution Summary: The author explains how the formula for calculating utility is:- Utility (U)=E(r)12A2 Weight of BillsWeight of IndexExpected return of portfolio Rp=t=1

Concept explainers

Videos

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk. To identify: Utility level of an investor with A=3.

Want to see the full answer?

Chapter 6 Solutions

Introduction: Utility level of an investor means that how much benefit investor can avail from portfolio performance. It may be assumed that investor always want to earn high return from the investment for which he needs to take risk.

To identify: Utility level of an investor with A=3.