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1 year ago

Which investment would you select if you were risk neutral?

Business

1 answer:

nadezda [96]1 year ago

8 0

Here, the investor is risk-neutral.

A=0

Thus, U = E(r).

We have the requisite information to answer the question, hence option E is eliminated.

Investment Mean Return Std Dev U

1 0.12 0.3 0.12

2 0.15 0.5 0.15

3 0.21 0.16 0.21

4 0.24 0.21 0.24

Thus, it can be seen that investment 4 given the maximum utility, and is thus the selected investment for a risk neutral investor. Thus, option D.

What options does a risk-averse individual select?

When someone is considering different investment options, they are said to have a risk-neutral mentality.
One is considered to be risk neutral if they just consider possible profits, regardless of the danger.
To assess profit without considering risk may look like a dangerous behavior by nature.

Learn more about risk-neutral person

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<u>The complete question is - </u>

Use the below information to answer the following question Investment WN - Expected Return E() 0.12 0.15 0.21 0.24 Standard Deviation 0.3 0.5 0.16 0.21 U= E(r)-(A/2)s2 Which investment would you select if you were risk neutral? A. 1 B.2 C. 3 D. 4 E. Cannot be determined from the information given. If you are risk neutral, your only concern is with return, not risk.

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3 years ago

What are the two basic parts of a management plan?

weqwewe [10]

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3 years ago

Explain why each of the following statements is a rationale for conducting active or passive policy: Economic circumstances can

Vladimir79 [104]

Answer:

The rationale for conducting active policy is the interest of Congress to alter the state of the economy through a deliberate change in established policies.

But in the case of Passive policy, the government permits the status quo.

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Explanation:

The following statements applies passive policy because the economy is expected to stabilize on it's own without the deliberate act of congress influencing it:

Economic circumstances can change dramatically between the time that an economic downturn begins and the time when policy actions have an effect on the economy.
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The following statements is a rationale for conducting active policy since the government's intervention is required:

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3 years ago

Carmela was promoted to a management position at work but was not fully prepared for the number of new responsibilities in the n

Sophie [7]

Answer:

EXPLAINING STRESSFUL EVENTS BY ATTRIBUTING THEM TO A TEMPORARY SITUATION.

Explanation:

Attribution theory deals with how the social perceiver uses information to arrive at causal explanations for events. It examines what information is gathered and how it is combined to form a causal judgment.

Explanatory style is the characteristic, habitual way individuals explain the causes of good and bad events they experience.

Stressful events can either be good or bad. People may attribute stressful events to factors that are either temporary or permanent and specific or universal.

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3 years ago

Eastern Electric currently pays a dividend of about $1.64 per share and sells for $27 a share.

Gre4nikov [31]

Answer:

a. 9.07%

b. 5.93%

c. 12.07%

Explanation:

Dividend valuation method is used to calculate the the value of stock based on the dividend paid, its growth rate and rate of return.

Stock Price = Dividend / ( Rate of return - Growth rate )

$27 = $1.64 / ( Rate of return - 3% )

Rate of return - 0.03 = $1.64 / $27

Rate of return - 0.03 = 0.0607

Rate of return = 0.0607 + 0.03

Rate of return = 0.0907 = 9.07%

$27 = $1.64 / ( 12% - Growth rate )

0.12 - Growth rate = $1.64 / $27

0.12 - Growth rate = 0.0607

Growth rate = 0.12 - 0.0607

Growth rate = 0.0593 = 5.93%

$27 = $1.64 / ( Rate of return - 6% )

Rate of return - 0.06 = $1.64 / $27

Rate of return - 0.06 = 0.0607

Rate of return = 0.0607 + 0.06

Rate of return = 0.1207 = 12.07%

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3 years ago