There are three risky securities (A, B, and C) in the market. An investor can only invest in individual securities (not portfolio). E(r) σ A 0.2 1 B 0.3 2 C 0.21 3 (a) If a risk-averse investor prefers security C to security A. Will the investor prefer security B to security A? (b) Are there risk-averse investors who prefer A to B? [Hint: draw a graph to answer this question.]
There are three risky securities (A, B, and C) in the market. An investor can only invest in individual securities (not portfolio). E(r) σ A 0.2 1 B 0.3 2 C 0.21 3 (a) If a risk-averse investor prefers security C to security A. Will the investor prefer security B to security A? (b) Are there risk-averse investors who prefer A to B? [Hint: draw a graph to answer this question.]
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13QTD
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There are three risky securities (A, B, and C) in the market. An investor can only invest in individual securities (not portfolio).
E(r) | σ | |
A | 0.2 | 1 |
B |
0.3 |
2 |
C | 0.21 | 3 |
(a) If a risk-averse investor prefers security C to security A. Will the investor prefer security B to security A?
(b) Are there risk-averse investors who prefer A to B? [Hint: draw a graph to answer this question.]
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