Investment	Expected Return E(r)	Standard Deviation
1	0.12	0.3
2	0.15	0.5
3	0.21	0.16
4	0.24	0.21

1. U = E(r) − (A/2)s2, where A = 4.0.Based on the utility function above, which investment would you select?

A. analyzing financial statements.

B. assessing risk tolerance.

C. estimating security betas.

D. determining how much money a client needs to make.

E. identifying market anomalies.

A. 62.5% and 37.5%

B. 75% and 25%

C. cannot be determined

D. 57% and 43%

E. 85% and 15%

A. III and IV

B. I and III

C. I and II

D. II and IV

E. I and V

A. represented by the scaling factor "−.005" in the utility function.

B. the rate that a risk-free investment would need to offer with certainty to be considered equally attractive as the risky portfolio.

C. the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk-averse investors.

D. the minimum rate guaranteed by institutions such as banks.

E. the rate that the investor must earn for certain to give up the use of his money.

A. the security's variance.

B. minimum required utility of the portfolio.

C. investor's return requirement.

D. investor's aversion to risk.

E. certainty-equivalent rate of the portfolio

A. They only accept risky investments that offer risk premiums over the risk- free rate.

B. They only care about the rate of return and accept investments that are fair games.

C. They only care about the rate of return.

D. They accept investments that are fair games.

E. They are willing to accept lower returns and high risk.