Refer to Scenario 5.10. Hillary’s indifference curves showing her preferences toward risk and return can be shown in a diagram. Expected return is plotted on the vertical axis and standard deviation of return on the horizontal axis. Although her indifference curves are upward sloping and bowed downward, their slope is very gradual (they are almost horizontal). With these indifference curves Hillary will invest:
A. most of her savings in Treasury bills, and a small percentage in the real estate project.
B. all of her savings in Treasury bills.
C. half of her savings in Treasury bills and half in the real estate project.
D. most of her savings in the real estate project, and a small percentage in Treasury bills.
Answer:D
Refer to Scenario 5.10. Hillary’s indifference curves showing her preferences toward risk and return can be shown in a diagram. Expected return is plotted on the vertical axis and standard deviation of return on the horizontal axis. Although her indifference curves are upward sloping and bowed downward, their slope is very gradual (they are almost horizontal). With these indifference curves Hillary will invest:
A. most of her savings in Treasury bills, and a small percentage in the real estate project. B. all of her savings in Treasury bills. C. half of her savings in Treasury bills and half in the real estate project. D. most of her savings in the real estate project, and a small percentage in Treasury bills.