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 decreases.
C) will decrease as the variance decreases.
D) will increase as the variance increases.
E) will increase as the rate of return increases.

Question

Quizplus · Accepted Answer

The utility score an investor assigns to a portfolio generally increases as the expected rate of return increases, reflecting the investor's preference for higher returns. Other options describe decreasing utility with decreasing risk or increasing utility with increasing risk, which contradicts standard financial theory that investors are risk-averse and prefer higher returns.

The Utility Score an Investor Assigns to a Particular Portfolio