- CFA Exams
- CFA Exam: Level I 2021
- Study Session 18. Portfolio Management (1)
- Reading 52. Portfolio Risk and Return: Part I
- Subject 4. Risk Aversion and Portfolio Selection

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**CFA Practice Question**

In the mean-standard deviation graph, which one of the following statements is true regarding the indifference curve of a risk-averse investor?

B. It is the locus of portfolios that have the same standard deviations and different rates of return.

C. It is the locus of portfolios that offer the same utility according to returns and standard deviations.

D. It connects portfolios that offer increasing utilities according to returns and standard deviations.

A. It is the locus of portfolios that have the same expected rates of return and different standard deviations.

B. It is the locus of portfolios that have the same standard deviations and different rates of return.

C. It is the locus of portfolios that offer the same utility according to returns and standard deviations.

D. It connects portfolios that offer increasing utilities according to returns and standard deviations.

Correct Answer: C

It represents the same utility, different combination of return and risk.

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