A Portfolio Has an Expected Rate of Return of 0

question 55

Multiple Choice

A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U = E(r) (A/2) s2. Which value of A makes this investor indifferent
Between the risky portfolio and the risk-free asset?

• A) 5
• B) 6
• C) 7
• D) 8

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Definitions:

Deception

The act of misleading or deceiving others by concealing or distorting the truth.

Milgram's Subjects

Participants in Stanley Milgram's experiments on obedience, demonstrating the powerful influence of authority on individual actions.

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A low-intensity electrical shock, often used in psychological experiments to safely simulate stress or discomfort without causing actual harm to participants.

Group Dynamics

The study of the behavioral and psychological processes affecting the behavior and development of groups.