Homework Answers
1.
Answer: B
As per the graph, stock is in the highest place, where the corresponding risk and return both are high. Therefore, it gives high rewards at the cost of high risk.
Other options are not relevant here.
2.
Answer: B
Since the person is risk averse, he should not invest in risky affairs (like mutual funds, bonds, and stocks). He is completely reluctant to take risk and should search an investment where his money will be the safest but still can earn the best return. The certificate of deposit is the best here.
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1. Assuming that Frank will invest all $100,000, develop a
linear programming model to determine the amount to be invested in
each products so that the total risk will be minimized while
meeting the four portfolio goals, by a) first write out the
complete formulation, b) then use Excel Solver to find the
solution.
(Hints: Risk is calculated by amount invested on a product
multiplied by its associated risk factor; for example, if $100 is
invested in Atlantic Lighting, then...
The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
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