A Risk Averse Investor with Utility Function Where X

Multiple Choice

A risk averse investor with utility function where X denotes wealth is indifferent between purchasing a stock or a bond for $100. The bond yields a safe return of 5%. The stock has a 50% chance of yielding a -19% rate of return (a capital loss of 19% and no dividend) . The risk premium on the stock is then

A) 38%
B) 29%
C) 9.5%
D) 4.05%
E) 1.55%