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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Social Security System

A government-sponsored program providing monetary assistance to people with an inadequate or no income.

Temporary Assistance to Needy Families (TANF)

A federal assistance program that provides financial aid to low-income families with dependent children.

Earned Income Tax Credit

A refundable tax credit for low to moderate-income working individuals and families, particularly those with children.

Proportional Income Tax

A taxation system where the tax rate remains constant regardless of the amount of income earned.