If an investor's indifference curves intersected, it would imply that
A) the risk averse investor would refuse a fair bet.
B) portfolios on two separate indifference curves would be equally desirable to the investor.
C) the standard deviation of portfolio returns increases as returns decrease.
D) the investor derives less additional satisfaction from each extra dollar earned.

Question

Quizplus · Accepted Answer

When indifference curves intersect, it means that the investor is indifferent between portfolios on different curves, implying that these portfolios are equally desirable to the investor. This is because the investor derives the same level of satisfaction from both portfolios, regardless of their potential returns and risks. Therefore, the investor would be willing to choose either portfolio, depending on their personal preferences or other factors. The other options are not related to the concept of intersecting indifference curves.

If an Investor's Indifference Curves Intersected, It Would Imply That