You are hired to make investment decisions for a large pension fund. You meet with representatives from the company to figure out what kind of choices to make. To get things started you try to figure out their risk preferences. You discuss the concept of risk and return with them to figure out what their level of risk aversion is.

You ask them if they would rather invest in a portfolio that offers an expected rate of return of 7% and a standard deviation of 15% or in the short term money market which offers a risk-free 2% rate of return. They say that they prefer the risky portfolio.

What is the maximum level of risk aversion for which the risky portfolio is still preferred to the risk free investment? What can you now say about the company’s employees’ risk preferences?

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. in the context of this scenario, which of the following statements is true? a. the industry for cell phones with holographic keyboards will face greater competition than the tablet industry. b. while the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. c. while the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. d. the industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.