If investors were not risk adverse on average, but rather risk averse or risk averse (neutral). Would the risk-return principles be true if you disliked or even enjoyed risk?

Jagmit owns a 2009 sedan (auto). The last time Jagmit renewed his auto insurance, he decided to drop the physical damage insurance on his vehicle. How is Jagmit dealing with the auto physical damage exposure in his personal risk management program? risk transfer passive retention avoidance O active retention

The Bloomberg index, which tracks investment-grade bonds, was down more than 13% in 2022. The stock market went also south as the S&P 500 slid  down more than 20% last year. Neither market helped investors.  Why was the bond market down last year? Some analysts are forecasting that the bond market will perform better in 2023. Why are they taking that position? Would you realigned your portfolio to more in bonds than stocks this year?   Use textbook and outside news sources to support your answers. TEXTBOOK: Economics of Money, Banking & Financial Markets; by Mishkin, Edition 13th

Suppose Caroline is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds.CombinationFraction of Portfolio in Diversified StocksAverage Annual ReturnStandard Deviation of Portfolio Return (Risk)(Percent)(Percent)(Percent)A 0 1.50 0B 25 3.00 5C 50 4.50 10D 75 6.00 15E 100 7.50 20There is a relationship between the risk of Caroline's portfolio and its average annual return.Suppose Caroline currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Sell some of her stocks and use the proceeds to purchase…

There are two portfolios available: A: Get $4 for sure B: 70% gaining $10 and 30% losing $10. The expected value of A is $ The expected value of B is $ The standard deviation of A is $ The standard deviation of B is $ (enter all answers with two decimal places.) Amanda is risk neutral, she would choose portfolio О А. В. B. Not enough information to determine. C. A. O D. A or B.

Monty Burns, the owner of the Springfield Nuclear Power Plant, owns many real estate properties. His last acquisition is a house worth €1,000, 000. Monty Burns considers purchasing an insurance for this new property. With probability 0.1, he will face damage reducing his property' value to €640,000 while with probability 0.9 his property will not be damaged and thus will remain at its current value. Burns' vNM utility for wealth is given by u°(w) = Vw. Miss b runs an insurance company in Springfield and is willing to insure Monty Burns. The insurance contract says the following: if Burns' new property is damaged, she will pay an amount q (the coverage) to Monty Burns in exchange for a payment r (the premium) that is due independently from the occurence of the damage. Miss b's vNM utility over her income y is u°(y) = y.

Use the information in the paragraph to answer the following questions. In early October 2008, before the Global Financial Crisis broke, the SA risk premium was a low 2%. But by 24 October that month, the risk premium had risen devastatingly to 6.5%. By the end of that tumultuous year, the risk premium had declined to a still elevated and expensive 4%. On 19 October 2015, the risk premium before Nenegate was an average of 2.4%. But by 20 January 2016, the risk premium had topped out at 3.89%, a 150-bps increase. This declined after the Ministry of Finance had been restored to what was regarded as safer hands. a. The above paragraph notes two economic shocks which resulted in changes (initial increase, then decrease) in the risk premium in South Africa. With use of two diagrams explain how these changes would have impacted the cost of borrowing, the real interest rate and output in South Africa. b. What policy/ies could the South African government have adopted to offset the impact of…

In the table, suppose the equal probabilities for weak economy and strong economy. Security B pays $600 if the economy is week and $0 if the economy is strong.       Cash Flow in One Year   Security  Market Price Today Weak Economy Strong Economy Market index  1000 750 1350 Security B   600 0 Risk-free bond 1280 1350 1350   1) The expected return of security B is  %. (Round to 2 decimal places)    2)  The risk premium of security B is  %. (Round to 2 decimal places)    3) Suppose a new security C has a Market Price Today = 2 * Security B + Risk-free bond, the equal probabilities for weak economy and strong economy. Security C pays $2250 if the economy is week and $1350 if the economy is strong, the expected return of security C is  %. (Round to 2 decimal places)

Which of the following statements is false?   a. The slope of the security market line is measured by beta. b. Company-specific risk can be diversified away. c. The market risk premium is affected by attitudes about risk. d. Higher beta stocks have a higher required return.

3. The risk free rate is 3%. The optimal risky portfolio has an expected return of 9% and standard deviation of 20%. Answer the following questions.  (a)  Assume the utility function of an investor is U = E(r) − 0.5Aσ2. What is condition of A to make the investors prefer the optimal risky portfolio than the risk free asset? (b)  Assume the utility function of an investor is U = E(r) − 2.5σ2. What is the expected return and standard deviation of the investor’s optimal complete portfolio?