4. The variable (A) in the utility function represents the:A. investor's return requirement.B. investor's aversion to risk.C. certainty-equivalent rate of the portfolio.D. minimum required utility of the portfolio.E. none of the above.1Downloaded by My H?u Ng?c ([email protected])lOMoARcPSD|13409944

Explain Utility

A portfolio has an expected rate of return of 0.18 and a standard deviation s = 0.18. The risk-free rate is 9.99 percent. An investor has the following utility function: U = E(r) – (A/2)*s*s. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset? a. 7b. 5c. 8d. 6

A utility function, U(x), measures the amount of satisfaction gained by an individual who buys "x" units of a product or service. The Arrow–Pratt coefficient of relative risk aversion is defined by:

A.1 If an individual is risk averse, then:i. He prefers any lottery to amounts of money that are certain.ii. The certainty equivalent of a lottery is higher than its expected value.X. The utility function is concave.iv. The utility function is decreasing.

Marginal utility is:Multiple Choicediminishing.constant.increasing.unpredictable.