select all that applies) Group of answer choices a) will never make an investment with a risk-free payoff. b) has a convex utility function of income. c) has a concave utility function of income. d) will always choose the alternative with the largest risk. e) has
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A risk-loving person
(select all that applies)
Step by step
Solved in 2 steps
- In general, what is true of people's risk aversion for changes in income that are marginal (i.e., very small changes in income)? (a) They are less risk averse. (b) Their risk aversion does not change. (c) It depends on the shape of the individual utility function. (d) They are more risk averse.Investors require a _____ return as compensation for taking ____ risk. A) higher, margin B) higher, more C) higher, convexity D) lower, margin E) lower, more F) lower, convexityIf we use future value rather than present value to decide whether to make an investment, A) we will make a bad decision, since the future value will always be higher if the discount rate is positive. B) we will make a bad decision, since the future value will always be lower if the discount rate is positive. C) we will make the same decision using either future value or present value. D) There is not enough information given to answer the question.
- Do you believe on the principle-higher risk provides higher return? Can we achieve high return with no risk at all? Explain your answer.(a) According to CAPM, the expected return of a risky asset is larger than the risk free rate. (b) According to CAPM, the expected return of a risky asset increases with its variance. (c) According to the separation property, the optimal risky portfolio for an investor dependson the investor’s personal preference. (d) A less risk-averse investor has a steeper indifference curve for the utility function.If an investor prefers investment with higher risk, regardless to the return then he is following a strategy. O a. risk-aware O b. risk-averse C. risk-seeking O d. risk-neutral
- If the decision is to select the alternative with the maximum profit, then the alternative with the least present worth will be selected. Select one: True False 28Which one of the following statements is correct? Group of answer choices The lower the average return, the greater the risk premium. The greater the volatility of returns, the greater the risk premium. The lower the volatility of returns, the greater the risk premium. The risk premium is not affected by the volatility of returns. The risk premium is unrelated to the average rate of return.If an investor prefers investment with higher risk , regardless to the return then he is following a ________ strategy. a. risk-aware b. risk-neutral c. risk-averse d. risk-seeking
- When Decision making is affected by both personal perspective and characteristics this phenomenon can be called: O a. Expected Utility Theory O b. Prospect Theory Allais Paradox O d. Framing Ohmad is well known in taking rational choices for his own investments, can we considerAll things remaining equal, a risk averse investor who is less risk tolerant would prefer an investment with what beta? Select one: a. High b. Beta is not a relevant consideration for this investor c. Low d. ModerateAnswer whether each of the following statements is correct and explain your argument. \ (a) According to CAPM, the expected return of a risky asset is larger than the risk free rate. (b) According to CAPM, the expected return of a risky asset increases with its variance. (c) According to the separation property, the optimal risky portfolio for an investor dependson the investor’s personal preference. (d) A less risk-averse investor has a steeper indifference curve for the utility function.