Portfolio Risk and Return: Budget Line
10 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary reason for using discounting in project appraisal?

  • To determine the utility maximizing portfolio
  • To calculate the expected value of a lottery
  • To account for the degree of risk aversion of decision makers (correct)
  • To measure the riskiness of an investment portfolio

    • What is the risk-adjusted discount rate used for in project appraisal?

  • To determine the utility maximizing portfolio
  • To measure the riskiness of an investment portfolio
  • To calculate the expected return of an investment portfolio
  • To account for the degree of risk aversion of decision makers (correct)

    • What is the net present value (NPV) used for in investment appraisal?

  • To determine the utility maximizing portfolio
  • To determine the viability of a project (correct)
  • To calculate the expected return of an investment portfolio
  • To measure the riskiness of an investment portfolio

    • What is risk aversion in the context of investment decision making?

    <p>A preference for certain outcomes over uncertain ones</p> Signup and view all the answers

    What is the purpose of calculating the expected return of an investment portfolio?

    <p>To evaluate the performance of an investment portfolio</p> Signup and view all the answers

    How can an individual reduce risk in an investment portfolio?

    <p>By diversifying the portfolio</p> Signup and view all the answers

    What is the relationship between risk and return in an investment portfolio?

    <p>Higher risk is associated with higher returns</p> Signup and view all the answers

    What is the purpose of uncertainty analysis in investment decision making?

    <p>To evaluate the potential outcomes of an investment under different scenarios</p> Signup and view all the answers

    What is the role of discounting in uncertainty analysis?

    <p>To account for the time value of money and risk aversion</p> Signup and view all the answers

    What is the relationship between risk aversion and the demand for risky assets?

    <p>Risk-averse individuals demand fewer risky assets</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser