ACTSC371 Chapter Notes - Chapter 5: Utility, Risk Premium, Sharpe Ratio
5 Oct 2018
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When it comes to the construction of an investor"s portfolio, the goal is to construct a portfolio that will _____________________________________. We are also trying to determine if we can use mathematical formulas to construct an optimal portfolio. Assume an individual is offered two choices: one where he will get for sure and one where he has a. 50% chance of getting and 50% chance of getting nothing. The expected result in both cases is one with certainty and the other with uncertainty. The individual can either choose the gamble he is referred to as risk seeking or choose the certainty he is referred to as risk averse or the individual is indifferent he is risk neutral. The __________________ of any investment or investment portfolio refers to the attractiveness of that investment"s risk/return profile. The utility value for any investment depends on. ________________________ _________________________________________________ every investor views every investment differently.
