Exam 9: Decisions Under Risk and Uncertainty

Consider the two following common stocks The correlation coefficient between the returns for the two common stocks is .50. An investor plans to put 60% of his wealth in MGA common stock and 40% in MGB common stock. (a)Determine the expected return for this portfolio. (b)Determine the standard deviation of the portfolio's returns.

The Economist Frank Knight and others sometimes make a distinction between risk and uncertainty:

Simulation techniques used in risk analysis are:

In the riskadjusted discount rate approach, the cash flows for each project are discounted at the:

For an individual having a utility function characterized by a(n) ____, the maximization of expected monetary value criterion will, in general, yield the same decisions as the maximization of expected utility criterion.

Which of the following statements concerning marginal utility is (are) true?

Diminishing marginal utility:

A ____ is a transaction that limits the risk associated with market price fluctuations for a particular investment position.

A(n) ____ creates the legal obligation for the buyer (seller) to purchase (sell) a commodity specified in the contract at the agreed upon price at some future point in time.