CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

When graphing investor utility to show the tradeoff of risk and return, the utility curves of more risk-averse investors are ______.
A. steeper and facing up and to the left
B. flatter and facing up and to the left
C. steeper and facing up and to the right
Explanation: Utility curves for any risk-averse investor face up and to the left; the more risk-averse, the steeper the slope.

User Contributed Comments 10

User Comment
aero I am not american. What is facing up and to the left....?
justin northwestern.
MGM13 Think of the letter C lying on its side tangent to the efficient frontier. It is "face up". Where it lies along the EF determines how risk averse an investor is. To the left of the highest tangent point on the EF is more risk averse. To the right are investors willing to take on more risk. Hope this helps.
americade "facing up to the left" really should say "sloping right"
it's enough to know the info without the word games
dealsoutlook does return go on the x axis or does risk go on the x-axis??
uberstyle risk on x
StanleyMo The slope become steeper as more risk averse investor requests higher return with the same risk.
jgraham6 americade is right! Plot the graph for yourself and see. Expected return on y-axis, risk on the x-axis. As risk increases, the expected return increases.
hence the curve is upward sloping to the right
boddunah response to facing up and to the left.
-----northwestern-----hillarious. rofl
farhan92 i got my left and right mixed up :/
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