The indifference curves of two investors are plotted against a single portfolio budget line, where standard deviation is on the horizontal axis and expected return on the vertical axis. Indifference curve A is shown as tangent to the budget line at a point to the left of indifference curve B's tangency to the same line. Investors A and B are equally risk averse. Investor A is less risk averse than investor B. O It is not possible to say anything about either the risk aversion or the portfolio of the two investors. It is not possible to say anything about the risk aversion of the two investors, but they will hold the same portfolio. Investor A is more risk averse than investor B.
The indifference curves of two investors are plotted against a single portfolio budget line, where standard deviation is on the horizontal axis and expected return on the vertical axis. Indifference curve A is shown as tangent to the budget line at a point to the left of indifference curve B's tangency to the same line. Investors A and B are equally risk averse. Investor A is less risk averse than investor B. O It is not possible to say anything about either the risk aversion or the portfolio of the two investors. It is not possible to say anything about the risk aversion of the two investors, but they will hold the same portfolio. Investor A is more risk averse than investor B.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The indifference curves of two investors are plotted against a single portfolio budget line, where standard deviation is
on the horizontal axis and expected return on the vertical axis. Indifference curve A is shown as tangent to the budget
line at a point to the left of indifference curve B's tangency to the same line.
Investors A and B are equally risk averse.
O Investor A is less risk averse than investor B.
O It is not possible to say anything about either the risk aversion or the portfolio of the two investors.
O It is not possible to say anything about the risk aversion of the two investors, but they will hold the same portfolio.
Investor A is more risk averse than investor B.
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