Investment expected return standard deviation

Assignment Help Financial Management

Reference no: EM131909608

Investment Expected Return Standard Deviation

1 20% 38%

2 24% 34%

3 33% 28%

4 34% 27%

Consider an investor having the utility function U = E(r) – 0.5 A σ 2 .

A. On a stand-alone basis, which investment would they select if they are risk-averse with A = 3?

B. If they are risk-neutral, which investment would they pick?

C. If the investor with A=3 allocates their wealth between a risky portfolio P having expected return of 12% and standard deviation of 16% and the risk-free asset which returns 6%, what fraction (y) of their wealth will they allocate to the risky portfolio?

Reference no: EM131909608

Questions Cloud

Should investors care about mncs translation exposure : Where does translation exposure occur? Is it in the MNC's home country, or in its host country where it has a subsidiary? Explain and give an example.

The best definition of efficient market reaction : The best definition of efficient market reaction. A market in which insider trading do not exist is __________.

What are your thoughts about the purchasing function : Discuss how Supply Management and in particular Supply Chain Management benefits organizations in the public and private sectors.

Create power point presentation that is ten slidesin length : Create a power point presentation that is 10 slidesin length, not including the title slide or reference slide. Be formatted according to APA writing guideline.

Investment expected return standard deviation : Investment Expected Return Standard Deviation. what fraction (y) of their wealth will they allocate to the risky portfolio?

Explain how a government uses the general fund : Using your own words, please explain how a government uses the General fund. What type of transactions and activities are recorded in the general fund?

Implement to prevent this problem from happening in future : List three procedures that you should implement to prevent this problem from happening in the future.

How do the various types of operating leverage impact : How do the various types of operating and financial leverage impact a company? Provide examples to support your views.

About the use of debt as source of financing : Some people talk about the use of Debt as a source of financing as if it were evil and should be avoided at all costs.

User Account

All Pages