Consider the following statements when answering this question: 1. The allocation of a risk-averse investor's portfolio between a risk free asset and a risky asset never changes if the rate of return on both assets increases by the same amount. II. Given the choice between investing in a risk free asset or a risky asset with higher expected returns, the utility maximizing portfolio of a risk neutral or risk loving investor would never include the risk free asset. I is true and II is false. BI is false and II is true. I and II are true. I and II are false.

Consider the following statements when answering this question: 1. The allocation of a risk-averse investor's portfolio between a risk free asset and a risky asset never changes if the rate of return on both assets increases by the same amount. II. Given the choice between investing in a risk free asset or a risky asset with higher expected returns, the utility maximizing portfolio of a risk neutral or risk loving investor would never include the risk free asset. I is true and II is false. BI is false and II is true. I and II are true. I and II are false.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.13P

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