An investor owns a portfolio of assets that will generate a cash flow of $445 with prob. 0.25, $1,115- with prob. 0.45 and $3,010 with prob. 0.30. Assume the investor is risk averse and has an expected benefit function with box)-x5, where x is dollar payoff. What fixed price Z would be the lowest acceptable price the investor would sell this portfolio for? O $1,289 O $1,304 O $1.351 O $1,391

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An investor owns a portfolio of assets that will generate a cash flow of $445 with prob. 0.25, $1,115
with prob. 0.45 and $3,010 with prob. 0.30. Assume the investor is risk averse and has an expected
benefit function with bix) - x05, where x is dollar payoff. What fixed price Z would be the lowest
acceptable price the investor would sell this portfolio for?
O $1,289
O $1.304
O $1,351
O $1,391
Transcribed Image Text:An investor owns a portfolio of assets that will generate a cash flow of $445 with prob. 0.25, $1,115 with prob. 0.45 and $3,010 with prob. 0.30. Assume the investor is risk averse and has an expected benefit function with bix) - x05, where x is dollar payoff. What fixed price Z would be the lowest acceptable price the investor would sell this portfolio for? O $1,289 O $1.304 O $1,351 O $1,391
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