Solved: Measure of risk for a risk averse investor, Finance Basics

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Measure of risk for a risk averse investor

Question 1. Is risk aversion a reasonable assumption? What is the relevant measure of risk for a risk averse investor?

Question 2. What are the benefits of diversification to an investor? what is the key factor determing the extent of these benefits?

Question 3. Total risk can be decomposed into systematic risk. Explain each component of risk, and how each is affected by increasing the number of securities in a portfolio.

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Finance Basics: Measure of risk for a risk averse investor

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Finance Basics: Measure of risk for a risk averse investor

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