Assume an Investor with the Following Utility Function: U =

question 37

Multiple Choice

Assume an investor with the following utility function: U = E(r) - 3/2(s2) . To maximize her expected utility, she would choose the asset with an expected rate of return of _______ and a
Standard deviation of ________, respectively.

• A) 12%; 20%
• B) 10%; 15%
• C) 10%; 10%
• D) 8%; 10%

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Definitions:

Long-Term Welfare

Concern for the enduring well-being and prosperity of individuals, communities, or entities over an extensive period.

Unethical Process

Actions or procedures that go against moral principles and do not conform to ethical standards.

Inflate Profits

The act of artificially increasing a company's profit figures through deceptive or unethical accounting practices.

Moral Intensity

The degree to which an issue demands the application of ethical principles based on its potential impact.