INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Question
Chapter 6, Problem 1PS
Summary Introduction
To select: The statement which completes the sentence that an investor with higher degree of risk aversion compared to the lower degree of aversion.
Introduction : The risk aversion investors are used to reduce the risk of the portfolios and it can also reduce the risk completely. The risk-aversion investors can avoid the default risk by selecting the government guarantee securities.
Expert Solution & Answer
Answer to Problem 1PS
The correct option is (e).
Explanation of Solution
Given information : The investor with higher degree of risk aversion is compared with lower degree of risk aversion.
The investments which has low standard deviation has low risk therefore investors includes the investments with the value of low standard deviation.
The analysis of the risk return −trade off is called as sharpe ratio but the investor with risk averse do not ready to take any kind of risk on their portfolio. Therefore sharpe ratio of the risky portfolios is low.
The rationale investor always required the high sharpe ratio for his portfolio and to obtain that he will chose only treasury bond and T-bills investments for investment alternatives.
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Students have asked these similar questions
Give typing answer with explanation and conclusion
The additional compensation that investors require to take on higher risk investments is the a. standard deviation. b. coefficient variation. c. Sharpe ratio. d. risk premium. e. risk aversion.
When describing the attitude of investors
towrds risk, which statement is correct?
A.Investors may behave as though they are
risk seekers for small investments
B.For a risk-averse investor, the standard
deviation of the return distribution is a
relevant measure of risk
C.Investors behave as though they are risk
averse for investments of significant size
D.All of the above
Which one of the following statements is correct?
Group of answer choices
The lower the average return, the greater the risk premium.
The greater the volatility of returns, the greater the risk premium.
The lower the volatility of returns, the greater the risk premium.
The risk premium is not affected by the volatility of returns.
The risk premium is unrelated to the average rate of return.
Chapter 6 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 6.A - Prob. 1PCh. 6.A - Prob. 2PCh. 6 - Prob. 1PSCh. 6 - Prob. 2PSCh. 6 - Prob. 3PSCh. 6 - Prob. 4PSCh. 6 - Prob. 5PSCh. 6 - Prob. 6PSCh. 6 - Prob. 7PSCh. 6 - Prob. 8PS
Ch. 6 - Prob. 9PSCh. 6 - Prob. 10PSCh. 6 - Prob. 11PSCh. 6 - Prob. 12PSCh. 6 - Prob. 13PSCh. 6 - Prob. 14PSCh. 6 - Prob. 15PSCh. 6 - Prob. 16PSCh. 6 - Prob. 17PSCh. 6 - Prob. 18PSCh. 6 - Prob. 19PSCh. 6 - Prob. 20PSCh. 6 - Prob. 21PSCh. 6 - Prob. 22PSCh. 6 - Prob. 23PSCh. 6 - Prob. 24PSCh. 6 - Prob. 25PSCh. 6 - Prob. 26PSCh. 6 - Prob. 27PSCh. 6 - Prob. 28PSCh. 6 - Prob. 29PSCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 7CPCh. 6 - Prob. 8CPCh. 6 - Prob. 9CP
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