Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios stocks, bonds, or commodities. Your financial adviser providesyou with the following table, which gives the probabilities of possible returns from each investmentTo maximize your expected return, you should choose:StocksBondsProbability Return Probability Return0.15 20%0.15 16.7%0610%T047.5%0.258%0.45 3.3%OA bondsOB stocksOC. commoditiesOD. All of the portfolios have the same expected return.If you are risk-averse and had to choose between the stock or the bond investments, you would chooseOA the stock portfolio because there is less uncertainty over the outcomeOB. the bond portfolio because there is less uncertainty over the outcome.OC. the stock portfolio because of greater expected return.OD. the bond portfolio because of greater expected return.CommoditiesProbability Return0220%0.215%0.28%02025%0%

Risk Averse: Someone who avoids taking risks and prioritises safety is said to be risk-averse. They…

Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios stocks, bonds, or commodities Your financial advisen you with the following table, which gives the probabilites of possible returns from each investment Stocks Bonds Commodities Probability Return Probability Return Probability Return 0.15 02 20% 06 20% 0.15 16.7% 04 02 15% 0.25 02 8% 0.45 5% 0% To maximize your expected return, you should choose: OA bonds OB stocks 8% 3.3% OA the stock portfolio because there is less uncertainty over the outcome OB. the bond portfolio because there is less uncertainty over the outcome OC. the stock portfolio because of greater expected return 10% 7.5% OC. commodites OD. All of the portfolios have the same expected retum If you are risk-averse and had to choose between the stock or the bond investments, you would choose 02 02

Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios stocks, bonds, or commodities Your financial advisen you with the following table, which gives the probabilites of possible returns from each investment Stocks Bonds Commodities Probability Return Probability Return Probability Return 0.15 02 20% 06 20% 0.15 16.7% 04 02 15% 0.25 02 8% 0.45 5% 0% To maximize your expected return, you should choose: OA bonds OB stocks 8% 3.3% OA the stock portfolio because there is less uncertainty over the outcome OB. the bond portfolio because there is less uncertainty over the outcome OC. the stock portfolio because of greater expected return 10% 7.5% OC. commodites OD. All of the portfolios have the same expected retum If you are risk-averse and had to choose between the stock or the bond investments, you would choose 02 02

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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