Answer to Question #62418 in Microeconomics for Chelsea

Question #62418
Suppose an investor could get a 3% rate of return with no risk, but higher returns require more risk at a constant rate. Draw an investor opportunity schedule and show where a person might maximize utility. Does a person accept some risk?
1
Expert's answer
2016-10-15T13:28:03-0400
If an investor could get a 3% rate of return with no risk, but higher returns require more risk at a constant rate, then a person accept some level of risk, which is acceptable for him and provides high enough rate of return. The higher is rate of return, the higher is utility.

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