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Question 10. You want to figure out the risk aversion for your client. After showing him...

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Finance

Question 10. You want to figure out the risk aversion for yourclient. After showing him a number of investment alternatives youfind that the two alternatives below, A and B, give your client thesame Utility. Using the standard definition for Utility: a) What isyour clients risk aversion? b) What is your client’s utility forthese two investments?

Stdev A: 18%

Stdev B: 15%

E(r) A: 10%

E(r) B: 7%

Answer & Explanation Solved by verified expert
3.9 Ratings (580 Votes)
Answer U Er 05 x A x sigma squared U Utility A risk aversion coefficient sigma square square of volatility Standard deviation is a    See Answer
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Question 10. You want to figure out the risk aversion for yourclient. After showing him a number of investment alternatives youfind that the two alternatives below, A and B, give your client thesame Utility. Using the standard definition for Utility: a) What isyour clients risk aversion? b) What is your client’s utility forthese two investments?Stdev A: 18%Stdev B: 15%E(r) A: 10%E(r) B: 7%

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