CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Consider a risky portfolio, P, with an expected rate of return of 0.15 and a standard deviation of 0.15, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve?

A. E(r) = 0.15; Standard deviation = 0.20
B. E(r) = 0.15; Standard deviation = 0.10
C. E(r) = 0.10; Standard deviation = 0.10
D. E(r) = 0.20; Standard deviation = 0.15
Correct Answer: C

User Contributed Comments 7

User Comment
aniketcpp any explnataion??
johntan1979 Look at the graph, you'll understand better.
jonan203 think of any curve with a slope, if P shared a curve with A, B or D, the curve wouldn't be a curve anymore.

plot each portfolio on some graph paper and you'll see why.
davcer sharpe ratio or slope is what matters
Kevdharr If standard deviation goes up, then the expected return must go up. So A is wrong...

If standard deviation goes down, then expected return must go down. So B is wrong and C is correct.

If standard deviation remains the same, then the expected return must also remain the same. So D is wrong...
UcheSam Good one @Kevdhair, that was the principle I used.
Pooja999 @Kevdharr thanks!
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