1. Elias is a risk-averse investor. David is a less risk-averse investor than Elias. Therefore,
for the same risk, David requires a higher rate of return than Elias.
for the same return, Elias tolerates higher risk than David.
for the same risk, Elias requires a lower rate of return than David.
for the same return, David tolerates higher risk than Elias.
2. In a return-standard deviation space, which of the following statements is(are) true for risk-averse investors? (The vertical and horizontal lines are referred to as the expected return-axis and the standard deviation-axis, respectively.)
I) An investor's own indifference curves might intersect.
II) Indifference curves have negative slopes.
III) In a set of indifference curves, the highest offers the greatest utility.
IV) Indifference curves of two investors might intersect.
Multiple Choice
I and II only
II and III only
I and IV only
III and IV only
None of the options are correct.