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.

Question

Quizplus · Accepted Answer

To build an indifference curve, we adjust the standard deviation and find the expected return needed to maintain the same utility level, reflecting the trade-off between risk and return.

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