Question
Investors can form complete portfolios out of two assets: a risk-free asset and a risky portfolio. Peter is more risk-averse than Tom. Which of the
Investors can form complete portfolios out of two assets: a risk-free asset and a risky portfolio. Peter is more risk-averse than Tom. Which of the following statements is consistent with both investors making the optimal portfolio choice?
Peters optimal complete portfolio has 50% invested in the risky portfolio; Toms optimal complete portfolio has more than 50% invested in the risky portfolio.
Peters optimal complete portfolio has 100% invested in the risk-free asset; Toms optimal complete portfolio also has 100% invested in the risk-free asset.
Peters optimal complete portfolio has 100% invested in the risky portfolio; Toms optimal complete portfolio involves lending money at the risk-free rate.
Peters optimal complete portfolio has 30% invested in the risky portfolio; Toms optimal complete portfolio has less than 30% invested in the risky portfolio.
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