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
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.
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| 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 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 30% invested in the risky portfolio;Toms optimal complete portfolio has less than 30% invested in the risky portfolio. |
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Focus On Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Melissa Hart
7th Edition
1265521972, 978-1265521974
