Question

The utility score an investor assigns to a particular portfolio, other things equal, Group of answer choices will increase as the rate of return increases. will decrease as the rate of return increases. will decrease as the variance decreases. will decrease as the standard deviation decreases.

Answer 1

Answer: will increase as the rate of return increases.

Explanation: Utility which is defined as the satisfaction experienced by a customer or investor in this regard is generally enhanced by higher expected returns and is diminished by increasing risks. Utility score is a measure of relative satisfaction that an investor derives from different portfolios. Other things being equal therefore, the utility score an investor assigns to a particular portfolio will increase as the rate of return increases.