- 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
The indifference curve for risk-seeking investors runs from ______.
B. northwest to southeast
C. west to east (a horizontal line)
A. southwest to northeast
B. northwest to southeast
C. west to east (a horizontal line)
Correct Answer: B
A is for risk-averse investors and C is for risk-neutral investors.
User Contributed Comments 4
| User | Comment |
|---|---|
| johntan1979 | I'm not sure if I totally understand this... Does this mean that a risk-seeking investor will demand lower returns for every increase in risk? Or should I say they are fine with lower returns with increasing risks? |
| gill15 | Second part of what you said --- there fine with substituting risk for return |
| Debashree | why would someone do that..weird |
| Teeto | Debashree, because risk is not just downside. It is increased volatility, which assumes bigger potential upside as well. So for some people 1/100 chance of winning a hundred is better than 2 dollars certain cash. That's where casinos make money. |