FIN 306 FINAL UPDATED SCRIPT QUESTIONS
AND VERIFIED SOLUTIONS
◉ Risk Preferences.
Answer: people have likes and dislikes.
◉ risk averse.
Answer: to dislike risk and require compensation to assume
additional risk
◉ risk neutral.
Answer: indifferent toward risk
◉ risk loving.
Answer: seeks risk and pays extra to take it
◉ True/False: Risk averse people refuse to take risks.
Answer: False: Risk averse will take risks but must be compensated
for them
◉ A typical investor is....
Answer: risk averse
, ◉ risk premium.
Answer: extra expected return to compensate a risk-averse investor
for taking risk
◉ If a stock has no risk....
Answer: No dispersion in potential outcomes. Zero variance
◉ S&P 500.
Answer: tracks the prices of 500 different stocks as a measure of
overall stock market performance
◉ Small U.S. Stocks.
Answer: "Small cap" stocks that are smaller in capitalization
compared to that of the S&P
◉ International Stocks.
Answer: stocks of companies based entirely outside the US or
throughout the world
◉ Corporate Bonds.
AND VERIFIED SOLUTIONS
◉ Risk Preferences.
Answer: people have likes and dislikes.
◉ risk averse.
Answer: to dislike risk and require compensation to assume
additional risk
◉ risk neutral.
Answer: indifferent toward risk
◉ risk loving.
Answer: seeks risk and pays extra to take it
◉ True/False: Risk averse people refuse to take risks.
Answer: False: Risk averse will take risks but must be compensated
for them
◉ A typical investor is....
Answer: risk averse
, ◉ risk premium.
Answer: extra expected return to compensate a risk-averse investor
for taking risk
◉ If a stock has no risk....
Answer: No dispersion in potential outcomes. Zero variance
◉ S&P 500.
Answer: tracks the prices of 500 different stocks as a measure of
overall stock market performance
◉ Small U.S. Stocks.
Answer: "Small cap" stocks that are smaller in capitalization
compared to that of the S&P
◉ International Stocks.
Answer: stocks of companies based entirely outside the US or
throughout the world
◉ Corporate Bonds.
