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Show that when U(x) = 1 1 x1, the risk averse investor will only purchase stocks if the expected return on the stock is higher
Show that when U(x) = 1 1 x1, the risk averse investor will only purchase stocks if the expected return on the stock is higher than the expected return on the bond. In other words, ks > 0 if and only if pu + qd > 1 + r.
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