A Set of Convex Indifference Curves Indicates Which One of the Following

question 38

Multiple Choice

A set of convex indifference curves indicates which one of the following about an investor's tradeoff between risk and expected returns?

• A) An investor requires an increasingly larger increment of expected return for each additional unit of risk incurred.
• B) An investor derives less additional satisfaction from each extra dollar earned.
• C) Portfolios on two separate indifference curves would be equally attractive to the investor.
• D) Risk averse investors require higher expected returns.

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Definitions:

Prudent Businessperson

An individual who exercises care and diligence in making decisions or taking actions in the context of business operations.

Small Business

An independently owned and operated company that is limited in size and in revenue depending on the industry.

Illegal Contracts

Agreements that are not enforceable by law due to their involvement with illegal activities or being against public policy.

Modern Approach

The modern approach refers to contemporary methods or perspectives that are updated, innovative, or different from traditional ways.