In the Mean-Standard Deviation Graph, Which One of the Following

question 25

Multiple Choice

In the mean-standard deviation graph, which one of the following statements is true regarding the indifference curve of a risk-averse investor

• A)It is the locus of portfolios that have the same expected rates of return and different standard deviations.
• B)It is the locus of portfolios that have the same standard deviations and different rates of return.
• C)It is the locus of portfolios that offer the same utility according to returns and standard deviations.
• D)It connects portfolios that offer increasing utilities according to returns and standard deviations.
• E)None of the options

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Definitions:

Cramer's Rule

A mathematical theorem used to solve systems of linear equations with the same number of equations as unknowns, using determinants.

System of Linear Equations

A group of one or more linear equations that share a common set of variables.

Row-echelon Form

A form of a matrix where all nonzero rows are above any rows of all zeroes, and each leading entry of a row is to the right of the leading entry of the previous row.

Matrix

A rectangular array of numbers, symbols, or expressions, arranged in rows and columns, used in linear algebra.