CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Steve is more risk-averse than Edie. On a graph that shows Steve and Edie's indifference curves, which of the following is true? Assume that the graph shows expected return on the vertical axis and standard deviation on the horizontal axis.

I. Steve and Edie's indifference curves might intersect.
II. Steve's indifference curves will have flatter slopes than Edie's.
III. Steve's indifference curves will have steeper slopes than Edie's.
IV. Steve and Edie's indifference curves will not intersect.
A. I and III
B. II and IV
C. I and II
Explanation: Although an investor's own indifference curves never intersect, different investors' indifference curves might intersect.

If an investor is more risk-averse, the slopes of his/her indifference curves will be steeper.

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