Author Question: Which of the following is true of risk aversion? A) Greater risk aversion results in lower ... (Read 39 times)

geoffrey · **on:** Jul 10, 2018

Which of the following is true of risk aversion?

A) Greater risk aversion results in lower required returns for each level of risk.
B) A reduction in risk aversion causes the required return for each level of risk to increase.
C) In general, widely shared expectations of hard times ahead tend to cause investors to become less risk averse.
D) Changes in risk aversion, and therefore shifts in the SML, result from changing preferences of investors.

Question 2

Xiao Xin is planning to accumulate 40,000 by the end of 5 years by making 5 equal annual deposits.

If she plans to make her first deposit today and can earn an annual compound rate of 9 percent on her investment, how much must each deposit be in order to accumulate the 40,000?
A) 6,132
B) 6,684
C) 23,844
D) 9,434