The following figures show the optimal portfolio choice for two investors with different levels of risk-aversion graphically. Which statement is correct? 0.3 0.3 0.25 0.2 LL 0.15 0.1 0.05 0 0.35 0.4 0.45 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.25 0.2 0.15 0.1 0.05 0 0 Figure 1 0.05 0.1 0.15 0.2 0.25 0.3 o(R) Figure 2 O Figure (2) shows an investor that borrows in risk-free rate and invests in the risky asset. O Figure (1) shows an investor with a conservative investment behavior. O In the optimal point of both figures, the highest indifference curve is tangent to the efficient frontier. O In Figure (1), more aggressive investment decision led to a higher Sharpe ratio. o(R) 0.4 0.45
The following figures show the optimal portfolio choice for two investors with different levels of risk-aversion graphically. Which statement is correct? 0.3 0.3 0.25 0.2 LL 0.15 0.1 0.05 0 0.35 0.4 0.45 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.25 0.2 0.15 0.1 0.05 0 0 Figure 1 0.05 0.1 0.15 0.2 0.25 0.3 o(R) Figure 2 O Figure (2) shows an investor that borrows in risk-free rate and invests in the risky asset. O Figure (1) shows an investor with a conservative investment behavior. O In the optimal point of both figures, the highest indifference curve is tangent to the efficient frontier. O In Figure (1), more aggressive investment decision led to a higher Sharpe ratio. o(R) 0.4 0.45
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13QTD
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