The slope of the utility curves for a strongly risk-averse investor,relative to the slope of the utility curves for a less risk-averse investor,will
A) Be steeper.
B) Be flatter.
C) Be vertical.
D) Be horizontal.
E) None of the above.

Question

Quizplus · Accepted Answer

A strongly risk-averse investor places a high value on avoiding risk and will require a greater increase in expected return to compensate for taking on additional risk. This means that the slope of their utility curve will be steeper compared to a less risk-averse investor. The less risk-averse investor is willing to accept more risk for a given level of return, and therefore their utility curve will be flatter.

The Slope of the Utility Curves for a Strongly Risk-Averse