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Describe the quadratic utility function

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QUADRATIC UTILITY FUNCTION

1. Describe the quadratic utility function.

2. What are the strengths and weakness(es) of using the quadratic utility function in financial theory?

3. Can you obtain (derive) the measure of absolute risk aversion for a quadratic utility function (with respect to wealth)?

4. Can you outline/explain how we could derive the capital asset pricing model (CAPM) using the quadratic utility function? Do the best you can on this question.

Reference no: EM133115980

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