Question 10. You want to figure out the risk aversion for your client. After showing him...

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Question 10. You want to figure out the risk aversion for yourclient. After showing him a number of investment alternatives youfind that the two alternatives below, A and B, give your client thesame Utility. Using the standard definition for Utility: a) What isyour clients risk aversion? b) What is your client’s utility forthese two investments?
Stdev A: 18%
Stdev B: 15%
E(r) A: 10%
E(r) B: 7%

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Answer U Er 05 x A x sigma squared U Utility A risk aversion coefficient sigma square square of volatility Standard deviation is a See Answer

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Question 10. You want to figure out the risk aversion for yourclient. After showing him a number of investment alternatives youfind that the two alternatives below, A and B, give your client thesame Utility. Using the standard definition for Utility: a) What isyour clients risk aversion? b) What is your client’s utility forthese two investments?Stdev A: 18%Stdev B: 15%E(r) A: 10%E(r) B: 7%