means of ranking investment portfolio. Utility measures satisfaction. Using the utility function, calculate the utility score the following with the following characteristics E(R)=22, stdv =30, risk aversion coefficient (A=5) U=E(r) - 0.005 A o Utility scores hat is the Utility Score What is a certain equivalent rate (CER) Risk Aversion and Utility Certainty equivalent rate Utility value of a risky portfolio An investment is attractive if Risk Aversion High - Certainty equivalent rate > riskfree alternative U = E( r ) - 0.005 A = 22 -0.005 A (34) Low Risk Averse-A>0 Risk Neutral Risk Lovers A 5 3 1 Value -6.90 4.66 16.22 Risk Free Rate = 5% Coefficient of risk aversion = 0 No penalty for risk Certainty equivalent rate = expected return Coefficient of risk aversion

Utility scores - means of ranking investment portfolio. Utility measures satisfaction. Using the utility function, calculate the utility score the following with the following characteristics E(R)=22,stdv=30, risk aversion coefficient (A=5) U=E(r)0.005A2 What is a certain equivalent rate (CER) Risk Aversion and Utility - Certainty equivalent rate - Utility value of a risky portfolio -An investment is attractive if - Certainty equivalent rate > risffree alternative U=E(r)0.005A2=220.005A(34)2 Risk Free Rate =5% - Risk Averse A>0 - Risk Neutral - Coefficient of risk aversion =0 - No penalty for risk - Certainty equivalent rate = expected return - Risk Lovers - Coefficient of risk aversion