Figure 14-2

Figure 14-2. The figure shows a utility function for Mary Ann.
-Refer to Figure 14-2. From the appearance of the utility function, we know that

A) if Mary Ann owns a house, she would not consider buying fire insurance.
B) Mary Ann would prefer to hold a portfolio of stocks with an average return of 8 percent and a standard deviation of 2 percent to a portfolio of stocks with an average return of 8 percent and a standard deviation of 5 percent.
C) Mary Ann would prefer to hold a portfolio of stocks with an average return of 8 percent and a standard deviation of 5 percent to a portfolio of stocks with an average return of 6 percent and a standard deviation of 3 percent.
D) All of the above are correct.

Correct Answer:

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