A Highly Risk-Averse Investor Is Considering the Addition of an Asset

question 94

Multiple Choice

A highly risk-averse investor is considering the addition of an asset to a 10-stock portfolio.The two securities under consideration both have an expected return equal to 15 percent.However,the distribution of possible returns associated with Asset A has a standard deviation of 12 percent,while Asset B's standard deviation is 8 percent.Both assets are correlated with the market with ρ = 0.75.Which asset should the risk-averse investor add to his/her portfolio?

• A) Asset A.
• B) Asset B.
• C) Both A and B.
• D) Neither A nor B.
• E) Cannot tell without more information.

Describe the endocrine system and its interaction with the nervous system.

Recognize the physiological stress response and its stages.

Explain the concept of allostasis and allostatic load and their significance to health.

Identify the principal neurotransmitters of the nervous system and their functions.

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Definitions:

Tariff

A tax levied on imported and, less commonly, exported goods, used to regulate trade by increasing the price of foreign products to encourage or protect domestic industry.

Real Exchange Rate

The rate at which a person can trade goods and services of one country for those of another, adjusted for inflation.

Import Quota

A limit set by a government on the quantity of a specific good that can be imported into the country.

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal per period of time.