A respected analyst forecasts that the return of the S&P 500 index portfolio over the coming year will be 10%. The one-year T-bill rate is 5%. Examination of recent returns of the S&P 500 Index suggest that the standard deviation of returns will be 18%. What does this information suggest about the degree of risk aversion of the average investor, assuming that the average portfolio resembles the S&P 500?

A respected analyst forecasts that the return of the S&P 500 index portfolio over the coming year will be 10%. The one-year T-bill rate is 5%. Examination of recent returns of the S&P 500 Index suggest that the standard deviation of returns will be 18%. What does this information suggest about the degree of risk aversion of the average investor, assuming that the average portfolio resembles the S&P 500?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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