Question

The utility score an investor assigns to a particular portfolio, other things equal, will decrease as the standard deviation decreases.

a. True
b. False

Answer 1

b. False

Step-by-step explanation:

The utility score assigned by an investor to a particular portfolio is influenced by various factors, including not only the expected return but also the risk or variability associated with the portfolio. The standard deviation is a measure of risk or volatility. In general, investors often prefer portfolios with higher expected returns and lower standard deviations, as it indicates a better risk-return trade-off.

Therefore, as the standard deviation decreases (indicating lower risk), other things being equal, the utility score assigned by an investor is more likely to increase, not decrease.

Answer 2

The utility score assigned to a portfolio by an investor will increase as the standard deviation decreases.

Step-by-step explanation:

The correct answer is b. False.

The utility score an investor assigns to a particular portfolio, other things equal, will increase as the standard deviation decreases. In finance, the standard deviation is a measure of risk. A lower standard deviation indicates less risk, and therefore, a higher utility score for the investor.