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Developing a Risk - Averse Investment Portfolio. An investor wishes to invest $ 1 0 , 0 0 0 for the coming year and anticipates
Developing a RiskAverse Investment Portfolio. An investor wishes to invest $ for the coming year and anticipates that the market will be in one of four different states at the end of the year. These states affect her investments in each of three possible stocks and a bond as shown in the following table. Unfortunately, she is uncertain about which market state will occur. Because she is riskaverse, the investor would like to invest in a manner so that the return in the worstcase, no matter what market state occurs, is as good as possible. The following table provides the current price of each possible instrument as well as projected yearend prices of each instrument under each of the four possible states.
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