The Certainty Equivalent Rate of a Portfolio Is

question 12

Multiple Choice

The certainty equivalent rate of a portfolio is

• A) the rate that a risk-free investment would need to offer with certainty to be considered equally attractive as the risky portfolio.
• B) the rate that the investor must earn for certain to give up the use of his money.
• C) the minimum rate guaranteed by institutions such as banks.
• D) the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk-averse investors.
• E) represented by the scaling factor "-0.005" in the utility function.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

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Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.