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Risk preferences Sharon Smith, the financial manager for Bart Corporation, wishes to evaluate three prospective investments: X, Y, and Z. Sharon will evaluate each of
Risk preferences Sharon Smith, the financial manager for Bart Corporation, wishes to evaluate three prospective investments: X, Y, and Z. Sharon will evaluate each of these investments to decide whether they are superior to investments that her company already has in place, which have an expected return of 15% and a standard deviation of 5%. The expected returns and standard deviations of the investments are as follows: a. If Sharon were risk neutral, which investment might she select? b. If she were risk averse, which investment might she select? c. If she were risk seeking, which investments might she select? d. Given the traditional risk preference behavior exhibited by financial managers, which investment might be preferred? Data Table X below.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Expected return 15% 17% 13% Standard deviation 7% 6% 8% Investment PrintDone
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