The indifference curve between expected return and the standard deviation of return for a risk-averse investor:
A) is downward-sloping.
B) is upward-sloping.
C) is horizontal.
D) is vertical.
E) can take any shape.

Question

Quizplus · Accepted Answer

For a risk-averse investor, the indifference curve between expected return and the standard deviation of return is upward-sloping. This indicates that to accept a higher level of risk (standard deviation), the investor requires a higher expected return.

The Indifference Curve Between Expected Return and the Standard Deviation