How investor-s curves would appear if strategy is adopted


Government bonds pay 5% risklessly. Stocks investments could pay 10% but with considerable risk. Suppose a 50:50 blend between the two investments would pay 7.5% but would have some risk. Although each investor's view on risk differs, the current investor's indifference curves for these investments are shown in the chart below for an investment of $1 million. How should this investor allocate the funds between these 2 investments? Why do the curves slope upward and to the right when we've seen that most, if not all, slope downward? Describe how the investor's curves would appear if she adopts the 50:50 strategy but would not accept any additional return.

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Microeconomics: How investor-s curves would appear if strategy is adopted
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