Risk preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to select one of three prospective investments: X, Y. and Z. Assume that the measure of risk Sharon cares about is an asset's standard deviation. The expected returns and standard deviations of the investments are as follows a. If Sharon were risk neutral, which investment would she select? Explain why. b. If she were risk overse, which investment would she select? Why? C. If she were risk seeking, which investments would she select? Why? d. Suppose a fourth investment, W is available. It offers an expected return of 14%, and it has a standard deviation of 9% of Sharon is rinkaverse, can you say which investment she will choose? Why or why not? Are there any Investments that you are certain she will not choose? a. If Sharon were risk neutral, which investment might she select? (Select the best answer below) Data Table A. Investment Y B. Investment Z C. Investment X (Click on the icon located on the top right corner of the data table below in order to copy its contents into a spreadsheet.) D. None of the three investments Investment Y b. If she were risk overse, which investment might she select? (Select the best answer below. Expected return 13% 13% 13% Standard deviation 7% 8% N O A Investment X 9% B. Investment z Print Done Click to select your answer Type here to search O I 100% 3:58 PM 9/11/2020 Risk preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to select one of three prospective investments: X, Y, and Z. Assume that the measure of risk Sharon cares about is an assets standard deviation. The expected returns and standard deviations of the investments are as follows II a. If Sharon were risk neutral, which investment would she select? Explain why b. If she were risk averse, which investment would she select? Why? c. If she were risk seeking, which investments would she select? Why? d. Suppose a fourth investment, W, is available. It offers an expected return of 14%, and it has a standard deviation of 9% If Sharon is risk averse, can you say which investment she will choose? Why or why not? Are there any investments that you are certain she will not choose? b. If she were risk averse, which investment might she select? (Select the best answer below.) O A. Investment X OB. Investment Z O C. Investment Y. OD. None of the three investments c. If she were risk seeking, which investments might she select? (Choose all that apply) O A Investment Y B. Investment Z Click to select your answer 100% BE 2 L 0 0 3:58 PM 9/11/2020 OBH Type here to search d. Suppose a fourth investment, W. is available. It offers an expected return of 14%, and it has a standard deviation of 9% If Sharon is risk averse, can you say which investment she will choose? Why or why not? Are there any investments that you are certain she will not choose? d. Suppose a fourth investment, W. is available. It offers an expected return of 15% and it has a standard deviation of 9%. If Sharon is risk averse, can you say which investment she will choose? Why or why not? Are there any investments that you are certain she will not choose? (Select the best answer below) O A. Sharon were risk averse, it is not clear whether she would prefer investment W or X From part (b), Sharon prefers X to Y and Z. but investment W has a lower expected return and standard deviation. Thus, Sharon's preference between W and X will depend on whether the return expected on Wis sufficient compensation for the extra investment. In other words, Sharon's choice will depend on her risk tolerance (ie, her degree of risk aversion) B. Sharon were risk averse, it is not clear whether she would prefer investment W or X From part (b), Sharon prefers X to Y and Z, but investment has a higher expected retum and standard deviation. Thus, Sharan's preference between Wand X will depend on whether the extra return expected on W is sufficient compensation for the extra risk. In other words, Sharan's choice will depend on her risk tolerance (ie, her degree of risk aversion) O C. If Sharon were risk averse, it is not clear whether she would prefer investment W or 2 From part (b), Sharon prefers Z to X and Y but investment has a higher expected return and standard deviation. Thus, Sharon's preference between W and Z will depend on whether the extra return expected on W is sufficient compensation for the extra risk. In other words, Sharon's choice will depend on her risk tolerance (le, her degree of risk aversion) OD. If Sharon were risk averse, it is not clear whether she would prefer investment W or Y From part (b). Sharon prefers Y to X and Z. but investment W has a higher expected return and standard deviation. Thus, Sharon's nofaranra hatuaan In Vill Horandon whether the viraram avartalan Wlle efforiont monestion for the avira rick In other wide Sharernira will donant nn har riekinlararalla har dorwaafrek Click to select your answer Type here to search O 100% 359 PM 9/11/2020 viation. The expected returns and standard deviations of the investments are as follows: DIVU Mvusmens , Y and Z. Assume that the measure of risk Sharon cares about sana's standard If Sharon were risk neutral, which investment would she select? Explain why If she were risk averse, which investment would she select? Why? If she were risk seeking, which investments would she select? Why? Suppose a fourth investment, W, is available. It offers an expected retum of 14%, and it has a standard deviation of 9% If Sharon is risk averse, can you say which investment she will choose? Why or why nor? Are there any vestments that you are certain she will not choose? A. If Sharon were risk averse, it is not clear whether she would prefer investment W or X. From part (b), Sharon prefers X to Y and Z, but investment W has a lower expected return and standard deviation. Thus, Sharon's preference between W and X will depend on whether the return expected on Wis sufficient compensation for the extra investment. In other words, Sharon's choice will depend on her risk tolerance (ie, her degree of link aversion) B. If Sharon were risk averse, it is not clear whether she would prefer investment WorX. From part(b). Sharon prefers to Y and Z but investment W has a higher expected return and standard deviation Thus, Sharon's preference between Wand X will depend on whether the extra return expected on Wis sufficient compensation for the extra risk. In other words, Sharon's choice will depend on her risk tolerance li her degree of risk aversion) C. If Sharon were risk averse, it is not clear whether she would prefer investment W or Z From part (b), Sharon prefers Z to X and Y but investment W has a higher expected return and standard deviation. Thus, Sharon's preference between W and Z will depend on whether the extra return expected on W is sufficient compensation for the extra risk. In other words, Sharon's choice will depend on her risk tolerance (le, her degree of risk aversion) D. If Sharon were risk averse, it is not clear whether she would prefer investment W or Y From part (b), Sharon prefers Y to X and Z but investment W has a higher expected return and standard deviation Thus, Sharon's preference between W and Y will depend on whether the extra return expected on W is sufficient compensation for the extra risk. In other words, Sharon's choice will depend on her risk tolerance fe her degree of risk aversion) ck to select your answer. 100% > Type here to search O 3:59 PM 9/11/2020