Steve is more risk-averse than Edie. On a graph that shows Steve and Edie's indifference curves, which of the following is true? Assume that the graph shows expected return on the vertical axis and standard deviation on the horizontal axis. I) Steve and Edie's indifference curves might intersect; II) Steve's indifference curves will have flatter slopes than Edie's; III) Steve's indifference curves will have steeper slopes than Edie's; IV) Steve and Edie's indifference curves will not intersect; V) Steve's indifference curves will be downward sloping and Edie's will be upward sloping.

A. 0.087; 0.06

B. 0.087; 0.12

C. 0.114; 0.12

D. 0.795; 0.14

E. 0.295; 0.12

A. the security's variance.

B. minimum required utility of the portfolio.

C. investor's return requirement.

D. investor's aversion to risk.

E. certainty-equivalent rate of the portfolio

A. an investor's risk tolerance is decreasing.

B. borrowing rate exceeding lending rate.

C. increase in the portfolio proportion of the risk-free asset.

D. reward-to-volatility ratio increasing.

E. a flawed theory

A. maximizes her expected utility.

B. maximizes her expected profit.

C. minimizes both her risk and return.

D. minimizes her risk.

E. maximizes her risk

A. I and II only

B. II, III, and IV only

C. II and III only

D. I only

E. II only

A. final wealth will be greater than initial wealth.

B. investors will lose money.

C. terminal wealth will be less than initial wealth.

D. more than one outcome is possible.

E. the standard deviation of the payoff is larger than its expected value

A. will increase as the rate of return increases.

B. will decrease as the rate of return increases.

C. will decrease as the standard deviation decreases.

D. will increase as the variance increases.

E. will decrease as the variance decreases.