Based on the Absolute Risk Aversion (RA ) and the odds result:
Estimate the following probabilities
assuming that y=100 (wealth):
a. U(y)=
b. U(y)=
c. What is the "h" that makes
Homework Answers
Absolute risk aversion=-u"(y)/u'(y)
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Based on the Absolute Risk Aversion (RA ) and the
odds result:
Estimate the following probabilities...
10. Based on the Absolute Risk Aversion (RA) and the odds result: 1 h Te(y,h) = 5 +ă (RA(y)) Estimate the following...
10. Based on the Absolute Risk Aversion (RA) and the odds result: 1 h Te(y,h) = 5 +ă (RA(y)) Estimate the following probabilities ry,h), assuming that y=100 (wealth): a. U(y)=(y)2, h=1. b. U(y)=(y)1/2, h=10. c. What is the “h” that makes (y,h)=1? 11. Based on the Relative Risk Aversion (RR) and the odds result: 1 0 TI(y,0) = 5 + 3 (Rrly)) Estimate the following probabilities (y,9), assuming that y=100 (wealth): a. U(y)=(y)2, 0 =0.01. b. U(y)=(y) , 0 =0.10....
16. Based on the Relative Risk Aversion (RR) and CRRA utility function (with y 1) and...
16. Based on the Relative Risk Aversion (RR) and CRRA utility function (with y 1) and the odds result: 1 0 70(,0) = 5 +7 a. What is the coefficient of risk aversion (Y) that makes roy, 0)=1, when y=100 and 0 =0.50? b. What is the coefficient of risk aversion (Y) that makes moy, 0)=1, when y=100 and 6 -0.25? c. Which individual is more risk averse based on the coefficient of risk aversion? d. What is the coefficient...
For each of the utility functions below, compute the Arrow-Pratt coefficients of risk-aversion. Say whether the utility...
For each of the utility functions below, compute the Arrow-Pratt coefficients of risk-aversion. Say whether the utility functions have constant absolute risk aversion, increasing absolute risk aversion, or decreasing absolute risk aversion. (a) u(w) = a + Bw where B > 0. (b) u(w) = w2. (c) u(w) = w1/2 (d) u(w) = wl-/(1-0) where o € (0,1). (e) u(w) =1-e-aw where a > 0.
Please use the following formulas to answer the question: 4. An investor has a risk aversion...
Please use the following formulas to answer the question:
4. An investor has a risk aversion of 4. If she wants to invest all her wealth in the stock market that has a standard deviation of 16%. What is the implied risk premium of the market? What is the market risk premium if she has a risk aversion of only 2? 1. Arithmetic average stock returns .-= (+r)x(1+r)x.X(1+r)]š –1 = 19+r)*-1 2. Geometric average stock returns 3. APR versus EAR:...
Q9. In the following example, we will explore when the odds ratio will approximate the risk...
Q9. In the following example, we will explore when the odds ratio will approximate the risk ratio.(1x8pts) Cohort study A: Diseased Not Diseased Total Exposed 5 195 200 Not Exposed 10 790 800 Total 15 985 1000 a. Calculate the risk ratio (1pt) b. Calculate the odds ratio (1pt) c. Does the odds ratio do a good job of approximating the risk ratio? (1pt) Cohort study B: Diseased Not Diseased Total Exposed 100 100 200 Not Exposed 200 600 800...
dont use excel solve using any equations 1. An investor has a risk aversion of 4....
dont use excel
solve using any equations
1. An investor has a risk aversion of 4. If she wants to invest all her wealth in the stock market that has a standard deviation of 16%. What is the implied risk premium of the market? What is the market risk premium if she has a risk aversion of only 2? 2. There are two stocks: A and B, and Treasury Bill (TB). The parameters of these securities are following: Expected Return...
Consider the following utility function of an agent (note that x can be understood as each possib...
Consider the following utility function of an agent (note that x can be understood as each possible outcome associated with a given choice, or the level of wealth given each possible outcome of a t choice) 2 n(x) =-r-a,a > 0, x > 0 Explain why this agent is risk averse (a sure amount is preferred over a risky bet having the same expected value). (a) (4 marks) (b) Show the degree of risk aversion of this agent by using...
show in excel! 10 Greta, an elderly investor, has a degree of risk aversion of A=...
show in excel!
10 Greta, an elderly investor, has a degree of risk aversion of A= 5 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 1-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 9% per year, with a SD of 17%. The hedge fund risk premium is estimated at 9% with...
(b) IULUI SAPT Two dice are rolled. Find the probabilities of the following events. 13. The...
(b) IULUI SAPT Two dice are rolled. Find the probabilities of the following events. 13. The first die is 3 or the sum is 8. 14. The second die is 5 or the sum is 10. One card is drawn from an ordinary deck of 52 cards. Find the probabilities of drawing the following cards. 15. (a) A 9 or 10 (b) A red card or a 3 (c) A 9 or a black 10 (d) A heart or a...
Problem 7-23 Greta, an elderly investor, has a degree of risk aversion of A 3 when...
Problem 7-23 Greta, an elderly investor, has a degree of risk aversion of A 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 1-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 8% per year, with a SD of 23%. The hedge fund risk premium is estimated at 10% with a SD...
10. Based on the Absolute Risk Aversion (RA) and the odds result: 1 h Te(y,h) = 5 +ă (RA(y)) Estimate the following probabilities ry,h), assuming that y=100 (wealth): a. U(y)=(y)2, h=1. b. U(y)=(y)1/2, h=10. c. What is the “h” that makes (y,h)=1? 11. Based on the Relative Risk Aversion (RR) and the odds result: 1 0 TI(y,0) = 5 + 3 (Rrly)) Estimate the following probabilities (y,9), assuming that y=100 (wealth): a. U(y)=(y)2, 0 =0.01. b. U(y)=(y) , 0 =0.10....
16. Based on the Relative Risk Aversion (RR) and CRRA utility function (with y 1) and the odds result: 1 0 70(,0) = 5 +7 a. What is the coefficient of risk aversion (Y) that makes roy, 0)=1, when y=100 and 0 =0.50? b. What is the coefficient of risk aversion (Y) that makes moy, 0)=1, when y=100 and 6 -0.25? c. Which individual is more risk averse based on the coefficient of risk aversion? d. What is the coefficient...
For each of the utility functions below, compute the Arrow-Pratt coefficients of risk-aversion. Say whether the utility functions have constant absolute risk aversion, increasing absolute risk aversion, or decreasing absolute risk aversion. (a) u(w) = a + Bw where B > 0. (b) u(w) = w2. (c) u(w) = w1/2 (d) u(w) = wl-/(1-0) where o € (0,1). (e) u(w) =1-e-aw where a > 0.
Please use the following formulas to answer the question:
4. An investor has a risk aversion of 4. If she wants to invest all her wealth in the stock market that has a standard deviation of 16%. What is the implied risk premium of the market? What is the market risk premium if she has a risk aversion of only 2? 1. Arithmetic average stock returns .-= (+r)x(1+r)x.X(1+r)]š –1 = 19+r)*-1 2. Geometric average stock returns 3. APR versus EAR:...
dont use excel
solve using any equations
1. An investor has a risk aversion of 4. If she wants to invest all her wealth in the stock market that has a standard deviation of 16%. What is the implied risk premium of the market? What is the market risk premium if she has a risk aversion of only 2? 2. There are two stocks: A and B, and Treasury Bill (TB). The parameters of these securities are following: Expected Return...
Consider the following utility function of an agent (note that x can be understood as each possible outcome associated with a given choice, or the level of wealth given each possible outcome of a t choice) 2 n(x) =-r-a,a > 0, x > 0 Explain why this agent is risk averse (a sure amount is preferred over a risky bet having the same expected value). (a) (4 marks) (b) Show the degree of risk aversion of this agent by using...
show in excel!
10 Greta, an elderly investor, has a degree of risk aversion of A= 5 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 1-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 9% per year, with a SD of 17%. The hedge fund risk premium is estimated at 9% with...
(b) IULUI SAPT Two dice are rolled. Find the probabilities of the following events. 13. The first die is 3 or the sum is 8. 14. The second die is 5 or the sum is 10. One card is drawn from an ordinary deck of 52 cards. Find the probabilities of drawing the following cards. 15. (a) A 9 or 10 (b) A red card or a 3 (c) A 9 or a black 10 (d) A heart or a...
Problem 7-23 Greta, an elderly investor, has a degree of risk aversion of A 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 1-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 8% per year, with a SD of 23%. The hedge fund risk premium is estimated at 10% with a SD...
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