Agents _________ Simply Choose the Option That Maximizes Their Expected

question 30

Multiple Choice

Agents _________ simply choose the option that maximizes their expected monetary payoff; they also evaluate the __________ of each payoff.

• A) do not, unselfishness
• B) do not, utility
• C) do, utility

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Definitions:

Active Portfolio

An active portfolio involves strategic buying and selling of stocks or other securities, managed by analysts or fund managers, aiming to outperform the market average or a benchmark index.

Sharpe Measure

Sharpe Measure, or Sharpe ratio, is used to assess the performance of an investment by adjusting for its risk, comparing the excess return over the risk-free rate to the standard deviation of the investment.

Personal Risk-Aversion

An individual's degree of unwillingness to accept uncertainty in investment outcomes or financial decisions.

Treynor-Black Model

A portfolio optimization model that blends a passively managed market portfolio with actively managed portfolios to achieve higher risk-adjusted returns.