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) not change.

Question

Quizplus · Accepted Answer

A strongly risk-averse investor would have utility curves that are steeper than those of a less risk-averse investor. This means that the marginal utility of wealth decreases more rapidly for the risk-averse investor as wealth increases, indicating that they have a higher aversion to risk. As a result, they require a larger premium (more reward) to bear a given level of risk compared to a less risk-averse investor.

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