Multiple Choice Questions
1. Which of the following statements regarding risk-aver 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 risk-free rate.
D) They are willing to accept lower returns and high risk.
E) A and B.
Answer: C Difficulty: Moderate
2. Which of the following statements is (are) true?
I)Risk-aver investors reject investments that are fair games.
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II)Risk-neutral investors judge risky investments only by the expected returns.
III)Risk-aver investors judge investments only by their riskiness.
IV)Risk-loving investors will not engage in fair games.
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A) I only
B) II only
C) I and II only
D) II and III only
E) II, III, and IV only
Answer: C Difficulty: Moderate
Rationale: Risk-aver investors consider a risky investment only if the investment offers a risk premium. Risk-neutral investors look only at expected returns when making
an investment decision.
3. In the mean-standard deviation graph an indifference curve has a ________ slope.
A) negative
焦虑症的具体表现 B) zero
C) positive
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E) cannot be determined
Answer: C Difficulty: Easy
Rationale: The risk-return trade-off is one in which greater risk is taken if greater returns can be expected, resulting in a positive slope.
4. In the mean-standard deviation graph, which one of the following statements is true regarding the indifference curve of a risk-aver 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.
售后服务机构 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 above.
Answer: C Difficulty: Moderate
Rationale: Indifference curves plot trade-off alternatives that provide equal utility to the individual (in this ca, the trade-offs are the risk-return characteristics of the portfolios).
5. In a return-standard deviation space, which of the following statements is (are) true for risk-aver investors? (The vertical and horizontal lines are referred to as the expected return-axis and the standard deviation-axis, respectively.)
I)An investor's own indifference curves might interct.
II)Indifference curves have negative slopes.
III)In a t of indifference curves, the highest offers the greatest utility.
IV)Indifference curves of two investors might interct.
A) I and II only
B) II and III only
C) I and IV only
D) III and IV only
E) none of the above
Answer: D Difficulty: Moderate
Rationale: An investor's indifference curves are parallel, and thus cannot interct and have positive slopes. The highest indifference curve (the one in the most northwestern position) offers the greatest utility. Indifference curves of investors with similar risk-return trade-offs might interct.
6. Elias is a risk-aver investor. David is a less risk-aver 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.
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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 determined.
Answer: D Difficulty: Moderate
Rationale: The more risk aver the investor, the less risk that is tolerated, given a rate of return.
剩菜放冰箱多久不能吃 7. When an investment advisor attempts to determine an investor's risk tolerance, which factor would they be least likely to asss?
A) the investor's prior investing experience
B) the investor's degree of financial curity
C) the investor's tendency to make risky or conrvative choices
D) the level of return the investor prefers
E) the investor's feeling about loss
Answer: D Difficulty: Moderate
U the following to answer questions 8-9:
Assume an investor with the following utility function: U = E(r) - 3/2(s2).
8. To maximize her expected utility, she would choo the ast with an expected rate of return of _______ and a standard deviation of ________, respectively.
迎新年的歌曲 A) 12%; 20%
B) 10%; 15%
C) 10%; 10%
D) 8%; 10%
E) none of the above
Answer: C Difficulty: Moderate
Rationale: U = 0.10 - 3/2(0.10)2 = 8.5%; highest utility of choices.
