Consider a risky portfolio, A, with an expected rate of return of 0.18 and a standard deviation of 0.18, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve for a risk-averse investor with a mean-variance utility function?

a.
Expected return = 0.20; Standard deviation = 0.20

b.
Expected return = 0.17; Standard deviation = 0.18

c.
Expected return = 0.18; Standard deviation = 0.25

d.
Expected return = 0.18; Standard deviation = 0.15

e.
Expected return = 0.12; Standard deviation = 0.18

Question

Consider a risky portfolio, A, with an expected rate of return of 0.18 and a standard deviation of 0.18, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve for a risk-averse investor with a mean-variance utility function?

	a.	Expected return = 0.20; Standard deviation = 0.20
	b.	Expected return = 0.17; Standard deviation = 0.18
	c.	Expected return = 0.18; Standard deviation = 0.25
	d.	Expected return = 0.18; Standard deviation = 0.15
	e.	Expected return = 0.12; Standard deviation = 0.18

Accepted Answer

The Answer is in the image, click to view ...

Question

Consider a risky portfolio, A, with an expected rate of return of 0.18 and a standard deviation of 0.18, that lies on a given indifference

Step by Step Solution

Step: 1

Get Instant Access with AI-Powered Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Students also viewed these Finance questions

Question

Question

Question

Question

Question

Question

Question

Question

Question