The value of a portfolio to investors equals its expected return minus 35 times its variance. There is one stock in the economy. Rational investors believe that its expected return is 1. Irrational investors believe that its expected return is 1.8. All agree that the variance of the stock is 0.02. Graph on one graph the price of the stock as the number of shares go from 20 to 60 in three different circumstances: A: There are 260 investors, and all are rational. B: There are 260 investors. 200 are rational and 60 are irrational. Shorting is allowed. C: There are 260 investors. 200 are rational and 60 are irrational. Shorting is not allowed.

The value of a portfolio to investors equals its expected return minus 35 times its variance. There is one stock in the economy. Rational investors believe that its expected return is 1. Irrational investors believe that its expected return is 1.8. All agree that the variance of the stock is 0.02. Graph on one graph the price of the stock as the number of shares go from 20 to 60 in three different circumstances: A: There are 260 investors, and all are rational. B: There are 260 investors. 200 are rational and 60 are irrational. Shorting is allowed. C: There are 260 investors. 200 are rational and 60 are irrational. Shorting is not allowed.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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