The utility score an investor assigns to a particular portfolio,other things equal,
A) will decrease as the rate of return increases.
B) will decrease as the standard deviation increases.
C) will decrease as the variance increases.
D) will increase as the variance increases.
E) will increase as the rate of return increases.

Question

Quizplus · Accepted Answer

The utility score represents the investor's satisfaction or happiness with the portfolio. Generally, investors prefer higher returns and therefore, as the rate of return increases, the utility score assigned by the investor will increase. Therefore, choice E is the correct answer. Choices A, B, and C are incorrect as they suggest that the utility score will decrease with increasing returns, standard deviation or variance, which is not necessarily true. Choice D is also incorrect as the utility score is typically negatively affected by higher variance, as investors generally dislike risk and unpredictability.

The Utility Score an Investor Assigns to a Particular Portfolio,other