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:

Prepaid Expenses

Expenses paid for in advance and recorded as assets until they are actually used or consumed.