Steve Is More Risk-Averse Than Edie

question 43

Multiple Choice

Steve is more risk-averse than Edie.On a graph that shows Steve and Edie's indifference curves, which of the following is true? Assume that the graph shows expected return on the vertical axis and standard deviation on the horizontal axis. I) Steve and Edie's indifference curves might intersect.
II. Steve's indifference curves will have flatter slopes than Edie's.
III. Steve's indifference curves will have steeper slopes than Edie's.
IV. Steve and Edie's indifference curves will not intersect.
V. Steve's indifference curves will be downward sloping, and Edie's will be upward sloping.

• A)I and V
• B)I and III
• C)III and IV
• D)I and II

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Definitions:

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use, reducing its book value on the balance sheet.

Loss on Disposal

An accounting term referring to the loss incurred when a fixed asset is sold or disposed of for less than its carrying amount on the books.