Question: By choosing several standard deviations, ranging from 0.05 to 0.25, and calculating the expected rates of return, draw the indifference curve corresponding to a Utility

By choosing several standard deviations, ranging from 0.05 to 0.25, and calculating the expected rates of return, draw the indifference curve corresponding to a Utility level of:

a. 0.05 For an investor with a risk aversion coefficient of 3.0. [5 marks]

b. 0.04 For an investor with a risk aversion coefficient of 4.0. [5 marks]

c. 0.05 For a risk-neutral investor. [5 marks]

d. What must be true about the sign of the risk aversion coefficient, A, for a risk lover? Draw the indifference curve for a utility of 0.05 for a risk lover investor. [10 marks]

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