1. There are three risky assets described by the table below: Asset Expected return Return standard deviation 1 9.00% 3.00% 2 12.00% 5.00% 3 15.00% 8.00% There are three investors X, Y and Z whose preferences represented by the utility function U = E(r) – 0.5ασ2, where α is the risk-aversion coefficient, and is lowest for X and highest for Z. The risk-free rate is 3%. If they have to form a complete portfolio of the risk-free asset and one of the three risky assets, which risky portfolio(s) will be picked by investors X, Y and Z respectively?
A. Asset 3 for investor X, Asset 3 for investor Y, and Asset 3 for investor Z
B. Asset 1 for investor X, Asset 1 for investor Y, and Asset 1 for investor Z
C. Asset 2 for investor X, Asset 2 for investor Y, and Asset 2 for investor Z
D. Asset 1 for investor X, Asset 2 for investor Y, and Asset 3 for investor Z
E. Asset 3 for investor X, Asset 2 for investor Y, and Asset 1 for investor Z
2. The following statements regarding gross profit are true except:
Gross profit is also called gross margin.
Gross profit less other operating expenses equals income from operations.
Gross profit is not calculated on the multiple-step income statement.
Gross profit must cover all operating expenses to yield a return for the owner(s) of the business.
Gross profit equals net sales less cost of goods sold.