Suppose an Investor Equally Allocates Their Wealth Between a Risk-Free

question 138

Multiple Choice

Suppose an investor equally allocates their wealth between a risk-free asset and a risky asset. If the MRS of the current allocation is less than the slope of the budget line, then the investor should:

• A) shift more of their wealth to the risky asset.
• B) shift more of their wealth to the risk-free asset.
• C) keep the same asset allocation.
• D) We do not have enough information to answer this question.

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Definitions:

Cultural Features

Characteristics that define a particular culture, including language, art, customs, traditions, and values.

Demographic Features

Characteristics of a population being studied, including age, sex, ethnicity, income, education, and more.

Idiocentric

Characterizing individuals who are more self-reliant and independent, prioritizing their personal goals over group goals.

Group

A group refers to a number of individuals who have shared interests or goals and are perceived to be bound together in some manner.