To Build an Indifference Curve, We Can First Find the Utility

question 2

Multiple Choice

To build an indifference curve, we can first find the utility of a portfolio with 100% in the risk-free asset, then

• A)find the utility of a portfolio with 0% in the risk-free asset.
• B)change the expected return of the portfolio and equate the utility to the standard deviation.
• C)find another utility level with 0% risk.
• D)change the standard deviation of the portfolio and find the expected return the investor would require to maintain the same utility level.

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Definitions:

Time Variance

The variance between the real duration it takes to finish a task and the initially projected time for its completion.

Total Cost Variance

The difference between the actual costs incurred and the standard (or expected) costs for a given production or project period.

Purchase Price Variances

The difference between the actual cost of goods purchased and the standard cost, used to measure the efficiency of the purchasing function.

Standard Cost

A predetermined cost of manufacturing, selling, or any other business operation, used for budgeting and performance evaluation.