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

question 47

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.
• E) change the risk-free rate and find the utility level that results in the same standard deviation.

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed by the government.