Which of the following is NOT an implication of risk aversion for the investment process? A. The security market line is upward sloping. B. The promised yield on AAA-rated bonds is higher than on A-rated bonds. C. Investors expect a positive relationship between expected return and expected risk. D. Investors prefer portfolios that lie on the efficient frontier to other portfolios with equal rates of return. Could you post the ans for this and explain?
Answer is B, because yields on an A rated bond should be higher than AAA because A rated bonds are more risky.
Argh,…silly mistake from my side!