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Basic Question 3 of 6
Risk-averse investors may choose different efficient portfolios because some ______
B. have higher risk tolerance than others.
C. prefer high risk and low expected returns.
A. have better information than others.
B. have higher risk tolerance than others.
C. prefer high risk and low expected returns.
User Contributed Comments 6
| User | Comment |
|---|---|
| julescruis | A is irrelevant here. |
| chamad | and so is C. Risk averse do not prefer high risk |
| hannovanwyk | could A not be true? If the investor has better info, he would understand his risk better and therefore he might decide to undertake such a risk |
| Nightsurfer | This model assumes complete market efficiency (perfect information). Therefore, no investor can know more than any other. By consequence, they all have the same expectation of return. |
| michlam14 | for c, i don't think anyone will want high risk low return? risk seeking will also want high return for high risk, but just doesnt seek as much premium as a risk averse person for taking risk? |
| johntan1979 | Nightsurfer is right. Go review the chapter on EMH. |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
describe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio
CFA® 2024 Level I Curriculum, Volume 2, Module 1.