question 5

Question 5 - (12 points) - continues on the next page The following assets are available. a) (3 points) If you are risk-loving (risk-seeking), which of the assets above do you prefer? Why? If you cannot make a decision, say what you would need to make a decision. b) ( 3 points) "Most investors are risk-loving." Is this statement true or false? Explain why. Question 5 - (11 points) - continued from the previous page c) ( 3 points) Assume your risk aversion coefficient is A=2.5. If you had to choose ONE of the above assets, which one would it be? Why? Your utility function is given by: Ui=E(ri)0.5Ai2 d) (3 points) Mr. Invest-A-Lot is risk averse. If you want to find the portfolio that gives Mr. Invest-A-Lot the highest utility, what information would you need beyond what is available above? Explain