question archive 1)A moderately risk-averse investor has 50 percent of her portfolio invested in stocks and 50 percent invested in risk free Treasury bills
1)A moderately risk-averse investor has 50 percent of her portfolio invested in stocks and 50 percent invested in risk free Treasury bills
Subject:EconomicsPrice: Bought3
1)A moderately risk-averse investor has 50 percent of her portfolio invested in stocks and 50 percent invested in risk free Treasury bills. Show how each of the following events will affect the investor's budget line, investor's preference for risk, and return on her portfolio. In your graph use an indifference curve to show the investor's preference between return and risk for the portfolio. Note draw 3 separate graphs.
a) The return on the risk free Treasury bills decreases
b) The investor becomes more risk averse
c) The price of risk has gone down, meaning the expected return on the stock market increases, but the standard deviation on the stock market remains the same.
