Why are investors risk-averse

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1. Why are investors risk-averse? How can investors deal with different degrees of risk? Justify your answer.

2. Calculate the elasticity of a call option with a premium of $5.50 and a strike price of $71. The call has a hedge ratio of 0.7, and the underlying stock’s price is currently $39.

3. You invest $3,300 for three years at 8 percent.

a. What is the value of your investment after one year? Multiply $3,300 × 1.08.

b. What is the value of your investment after two years? Multiply your answer to part a by 1.08. (Round your answer to 2 decimal places.)

c. What is the value of your investment after three years? Multiply your answer to part b by 1.08. This gives your final answer. (Round your answer to 2 decimal places.)

Reference no: EM132007761

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