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Q. Government bonds pay 5% riskless. Stocks investments could pay 10% but with considerable risk. Assume 50:50 blends among the two investments would pay 7.5% but would have some risk. Although each investor's view on risk differs the present investor's indifference curves for these investments are Elucidate how in the chart below for an investment of $1 million. Elucidate how should this investor allocate the funds among these 2 investments? Explain why do the curves slope upward also to the right when we've seen to most if not all slope downward? Describe Elucidate how the investor's curves would appear if she adopts the 50:50 strategies but would not accept any additional return.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M9169430

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