- 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(s) is (are) true?
II. A risk-averse individual will not engage in a fair bet.
III. For an investor there are many indifference curves.
I. A risk-averse individual has concave indifference curves.
II. A risk-averse individual will not engage in a fair bet.
III. For an investor there are many indifference curves.
Correct Answer: II and III
I. Indifference curves are convex, due to the diminishing marginal utility of return.
User Contributed Comments 2
| User | Comment |
|---|---|
| gill15 | Why is III correct? I thought each IC is different depending on the type of investor you are. A high risk aversion will have one IC and and risk lover will have a different one. Each investor has their own specific criteria which vary ALONG one IC.... Dont get it |
| schweitzdm | An IC is the set of porfolios with the same utility score. Utility score for a security varies from investor to investor. |