【正文】 Chapter 06Capital Allocation to Risky AssetsMultiple Choice Questions1.Which of the following statements regarding riskaverse investors is true?A.They only care about the rate of return.B.They accept investments that are fair games.C.They only accept risky investments that offer risk premiums over the riskfree rate.D.They are willing to accept lower returns and high risk.E.They only care about the rate of return, and they accept investments that are fair games.2.Which of the following statements is(are) true?I) Riskaverse investors reject investments that are fair games.II) Riskneutral investors judge risky investments only by the expected returns.III) Riskaverse investors judge investments only by their riskiness.IV) Riskloving investors will not engage in fair games.A.I onlyB.II onlyC.I and II onlyD.II and III onlyE.II, III, and IV only3.Which of the following statements is(are) false?I) Riskaverse investors reject investments that are fair games.II) Riskneutral investors judge risky investments only by the expected returns.III) Riskaverse investors judge investments only by their riskiness.IV) Riskloving investors will not engage in fair games.A.I onlyB.II onlyC.I and II onlyD.II and III onlyE.III and IV only4.In the meanstandard deviation graph an indifference curve has a ________ slope.A.negativeB.zeroC.positiveD.verticalE.cannot be determined5.In the meanstandard deviation graph, which one of the following statements is true regarding the indifference curve of a riskaverse investor?A.It is the locus of portfolios that have the same expected rates of return and different standard deviations.B.It is the locus of portfolios that have the same standard deviations and different rates of return.C.It is the locus of portfolios that offer the same utility according to returns and standard deviations.D.It connects portfolios that offer increasing utilities according to returns and standard deviations.E.None of the options6.In a returnstandard deviation space, which of the following statements is(are) true for riskaverse investors? (The vertical and horizontal lines are referred to as the expected returnaxis and the standard deviationaxis, respectively.)I) An investor39。s own indifference curves might intersect.II) Indifference curves have negative slopes.III) In a set of indifference curves, the highest offers the greatest utility.IV) Indifference curves of two investors might intersect.A.I and II onlyB.II and III onlyC.I and IV onlyD.III and IV onlyE.None of the options7.Elias is a riskaverse investor. David is a less riskaverse investor than Elias. Therefore,A.for the same risk, David requires a higher rate of return than Elias.B.for the same return, Elias tolerates higher risk than David.C.for the same risk, Elias requires a lower rate of return than David.D.for the same return, David tolerates higher risk than Elias.E.Cannot be determined8.When an investment advisor attempts to determine an investor39。s risk tolerance, which factor would they be least likely to assess?A.The investor39。s prior investing experienceB.The investor39。s degree of financial securityC.The investor39。s tendency to make risky or conservative choicesD.The level of return the investor prefersE.The investor39。s feelings about loss9.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%10.Assume an investor with the following utility function: U = E(r) 3/2(s2).To maximize her expected utility, which one of the following investment alternatives would she choose?A.A portfolio that pays 10% with a 60% probability or 5% with 40% probability.B.A portfolio that pays 10% with 40% probability or 5% with a 60% probability.C.A portfolio that pays 12% with 60% probability or 5% with 40% probability.D.A portfolio that pays 12% with 40% probability or 5% with 60% probability.11.A portfolio has an expected rate of return of and a standard deviation of . The riskfree 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 riskfree asset?A.5B.6C.7D.812.According to the meanvariance criterion, which one of the following investments dominates all others?A.E(r) = 。 Variance = B.E(r) = 。 Variance = C.E(r) = 。 Variance = D.E(r) = 。 Variance = E.None of these options dominates the other alternatives.13.Consider a risky portfolio, A, with an expected rate of return of and a standard deviation of , that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve?A.E(r) = 。 Standard deviation = B.E(r) = 。 Standard deviation = C.E(r) = 。 Standard deviation = D.E(r) = 。 Standard deviation = E.E(r) = 。 Standard deviation = 14.U = E(r) (A/2)s2,where A = .Based on the utility function above, which investment would you select?A.1B.2C.3D.4E.Cannot tell from the information given15.U = E(r) (A/2)s2,where A = .Which investment would you select if you were risk neutral?A.1B.2C.3D.4E.Cannot tell fr