- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 1. Portfolio Risk and Return: Part I
- Subject 2. Risk Aversion and Portfolio Selection
CFA Practice Question
Which statement is true?
II. Utility can be compared among different investors.
I. For an investor, a portfolio with a utility of 10 is 5 times better than a portfolio with a utility of 2.
II. Utility can be compared among different investors.
Correct Answer: Neither of these statements is true.
II. It is a personal concept.
I. Utility can only be used to rank various investments.
II. It is a personal concept.
User Contributed Comments 4
| User | Comment |
|---|---|
| schweitzdm | How is 1 false? The AN notes state: "it is possible to assign a utility score to any portfolio" A utility score will differ from person to person, but for John Doe, he could use utility scores to rank the two portfolios, couldn't he? |
| charliedba | You can assign an utility score but you cannot say 10 is 5 times better than 2. |
| sangiljin | Utility score is "ordinal" or "interval", not "ratio". |
| chesschh | UTILITY THEORY IS A MATTER OF RISK TOLERANCE, NOT WHICH IS GREATER |