Use the below information to answer the following question. U=E(r) - (A/2) s²,whereA= 4.0.
The variable (A) in the utility function represents the

Question

Use the below information to answer the following question. U=E(r) - (A/2)s²,whereA= 4.0. The variable (A) in the utility function represents the

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In the given utility function, the variable A represents the investor's aversion to risk. This is because A is multiplied with the systematic risk (S1) of the portfolio, which is a measure of the portfolio's volatility or riskiness. Higher the value of A, higher will be the investor's aversion to risk.

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