EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 6, Problem 6PS
Summary Introduction
To calculate: The indifference curve is to be drawn where utility score level is 0.05, risk aversion coefficient is 3 and standard deviation range is 0 to 0.25.
Introduction: The indifference curve is drawn between the expected return and risk. It is used for the representation of risk trade off for the investor.
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Students have asked these similar questions
Suppose the utility function is U = E(r) - 0.5Ao2. Draw the indifference curve corresponding to
a utility level of 0.2 for an investor with a risk aversion coefficient of 3. Please note the vertical
line indicates expected return, and plot standard deviation on the horizontal line.
What must be true about the sign of the risk aversion coefficient, A, for a risk lover? Draw the indifference curve for a utility level of .05 for a risk lover.
On the basis of the utility formula below, which investment would you select if you were risk averse with A = 4?
Investment
Expected return E(r)
Standard deviation
σ
1
0.12
0.30
2
0.15
0.50
3
0.21
0.16
4
0.24
0.21
Chapter 6 Solutions
EBK INVESTMENTS
Ch. 6.A - Prob. 1PCh. 6.A - Prob. 2PCh. 6 - Prob. 1PSCh. 6 - Prob. 2PSCh. 6 - Prob. 3PSCh. 6 - Prob. 4PSCh. 6 - Prob. 5PSCh. 6 - Prob. 6PSCh. 6 - Prob. 7PSCh. 6 - Prob. 8PS
Ch. 6 - Prob. 9PSCh. 6 - Prob. 10PSCh. 6 - Prob. 11PSCh. 6 - Prob. 12PSCh. 6 - Prob. 13PSCh. 6 - Prob. 14PSCh. 6 - Prob. 15PSCh. 6 - Prob. 16PSCh. 6 - Prob. 17PSCh. 6 - Prob. 18PSCh. 6 - Prob. 19PSCh. 6 - Prob. 20PSCh. 6 - Prob. 21PSCh. 6 - Prob. 22PSCh. 6 - Prob. 23PSCh. 6 - Prob. 24PSCh. 6 - Prob. 25PSCh. 6 - Prob. 26PSCh. 6 - Prob. 27PSCh. 6 - Prob. 28PSCh. 6 - Prob. 29PSCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 7CPCh. 6 - Prob. 8CPCh. 6 - Prob. 9CP
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