To maximize her expected utility, which one of the following investment alternatives would she choose?

A. 0.087; 0.06

B. 0.087; 0.12

C. 0.114; 0.12

D. 0.795; 0.14

E. 0.295; 0.12

A. will increase as the rate of return increases.

B. will decrease as the rate of return increases.

C. will decrease as the standard deviation decreases.

D. will increase as the variance increases.

E. will decrease as the variance decreases.

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.

A. maximizes her expected utility.

B. maximizes her expected profit.

C. minimizes both her risk and return.

D. minimizes her risk.

E. maximizes her risk

A. an investor's risk tolerance is decreasing.

B. borrowing rate exceeding lending rate.

C. increase in the portfolio proportion of the risk-free asset.

D. reward-to-volatility ratio increasing.

E. a flawed theory

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. The CAL shows risk-return combinations and is also called the efficient frontier of risky assets in the absence of a risk-free asset.

B. The CAL is also called the efficient frontier of risky assets in the absence of a risk-free asset.

C. The CAL shows risk-return combinations.

D. The slope of the CAL is also called the reward-to-volatility ratio.

E. The slope of the CAL equals the increase in the expected return of the complete portfolio per unit of additional standard deviation.