The correct answer is: D. None of the above
Risk-aversion is a measure of how much an investor is willing to tolerate risk in order to achieve a higher return. It is a subjective measure that can vary from investor to investor. There is no single way to measure risk-aversion, and different investors may use different methods.
The market rate of return is the average return on all investments in a given market. It is a measure of the overall risk and return of the market, but it does not tell you anything about an individual investor’s risk-aversion.
The risk-free rate of return is the return on an investment that is considered to be without risk. It is typically measured by the yield on a government bond. The risk-free rate of return is used as a benchmark for measuring the risk-return of other investments.
Portfolio return is the return on a group of investments. It is a measure of the overall risk and return of the portfolio, but it does not tell you anything about an individual investor’s risk-aversion.
In conclusion, there is no single way to measure risk-aversion. Different investors may use different methods, and there is no one-size-fits-all answer.