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For questions 5 8 to 6 0 : Assume that risk - aversion, depending on individuals, takes a value in - between - 2 and
For questions to : Assume that riskaversion, depending on individuals, takes a value inbetween and
ie integers from to a financial planner has created the following data to illustrate the application of
utility theory to portfolio selection:
A riskneutral investor is most likely to choose:
A Portfolio
B Portfolio
C Portfolios or
From the utility equation, Riskneutral implies that In this case, and portfolio
has the highest returns.
A riskadverse investor is most likely to choose:
A Portfolio or
B Portfolio or
C Portfolio
A riskseeker investor is most likely to choose:
A Portfolio
B Portfolio
C Portfolio or
Which of the following is NOT a rationale for the importance of the policy statement in
investing? It:
A helps investors understand the risks and costs of investing.
B forces investors to understand their needs and constraints.
C identifies specific stocks the investor may wish to purchase.
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