Author Question: Suppose an investor equally allocates their wealth between a risk-free asset and a risky asset. If ... (Read 164 times)

big1devin

  • Hero Member
  • *****
  • Posts: 583
Suppose an investor equally allocates their wealth between a risk-free asset and a risky asset. If the MRS of the current allocation is less than the slope of the budget line, then the investor should:
 
  A) shift more of their wealth to the risky asset.
  B) shift more of their wealth to the risk-free asset.
  C) keep the same asset allocation.
  D) We do not have enough information to answer this question.

Question 2

Good A is a Giffen good. If the price of good A were to suddenly double, the income effect would cause the purchases of good A to increase by
 
  A) more than double.
  B) exactly double.
  C) less than double.
  D) Any of the above are possible.
  E) none of the above



jlaineee

  • Sr. Member
  • ****
  • Posts: 380
Answer to Question 1

A

Answer to Question 2

D



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

The term pharmacology is derived from the Greek words pharmakon("claim, medicine, poison, or remedy") and logos ("study").

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

Did you know?

On average, the stomach produces 2 L of hydrochloric acid per day.

Did you know?

Fewer than 10% of babies are born on their exact due dates, 50% are born within 1 week of the due date, and 90% are born within 2 weeks of the date.

For a complete list of videos, visit our video library