What is the investors risk aversion coefficient

Assignment Help Business Economics

Reference no: EM13887732

Suppose an investor’s utility function is given by U(r) = 1/3 E(r) − 1/2 A · V ar(r). Suppose there is a risk-free asset whose return is given by ¯r = 0.03. Suppose there is a single risky asset P that has an expected return of 0.08 and standard deviation of 0.3. The investor maximizes utility by investing 25 percent of his wealth in the risky asset P. What is the investor’s risk aversion coefficient?

Reference no: EM13887732

Questions Cloud

Anything about demand for donuts and peaches : A consumer has a utility function, donuts (A) and peaches (B) given by u(A,B) = squareroot AB suppose donuts and peaches are priced .25 cents a unit, consumer income I is the unknown. Can you say anything about demand for donuts and peaches?

What fraction of wealth would investor invest in risky asset : Suppose an investor’s risk aversion coefficient is 3 and his utility function is U(r) = 1/2 E(r) − 1/2 A · V ar(r). Suppose there is a risk-free asset whose return is given by ¯r = 0.04. Suppose there is a single risky asset P that has an expected re..

Explain by using supply and demand curves : Consider the market for taxi service in a city. Explain, by using supply and demand curves, how each of the following actions will affect the market. (Consider each case separately) A. Bus drivers go on strike. B. Bus fares increase after a strike by..

Find the weights on each of these stocks : Suppose stocks A, B and C have the same expected return and standard deviation. The correlations of returns are given as follows Corr(A, B) = 0.7, Corr(B, C) = −0.3 and Corr(A, C) = 0.2. Find the weights on each of these stocks (they need to add up t..

What is the investors risk aversion coefficient : Suppose an investor’s utility function is given by U(r) = 1/3 E(r) − 1/2 A · V ar(r). Suppose there is a risk-free asset whose return is given by ¯r = 0.03. Suppose there is a single risky asset P that has an expected return of 0.08 and standard devi..

Prepare operating activity section of statement for rattigan : Rattigan Company's income statement contained the condensed information. Prepare the operating activities section of the statement of cash flows using the indirect method.

Compute mrs yanks federal income tax : Mrs. Cora Yank (age 42) is divorced and has full custody of her 10-year-old son, William. From the following information, compute Mrs. Yank's federal income tax (including any AMT) and the amount due with her Form 1040 or the refund she should receiv..

The role of the automatic transfer system : Explain The Automatic Transfer System in Details Including the following : The Role of the Automatic Transfer System,Example System Description,Modes of Operation

Compute mr and mrs bensons federal income tax : On the basis of the following information, compute Mr. and Mrs. Benson's federal income tax (including any AMT), self-employment tax, and Medicare contribution tax and the amount due with their Form 1040 or the refund they should receive.

User Account

All Pages