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Assume an investor A with a high degree of risk aversion and an investor B with a lower degree of risk aversion. Which one will

  1. Assume an investor A with a high degree of risk aversion and an investor B with a lower degree of risk aversion. Which one will prefer investment portfolios with higher risk premiums? Which one will prefer investment portfolios with higher Sharpe ratios?
  2. What is value at risk (VaR)? How is it used? Describe two short-comings of using VaR.
  3. How does a mortgage pass-through security work? Be sure to describe the cash flows.

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