8006 Exam Dumps | What kind of a risk attitude does a utility function with an upward sloping curvature indicate?

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Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition
PRMIA.8006.v2021-04-25.q101
Question 38

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Question 38/101

What kind of a risk attitude does a utility function with an upward sloping curvature indicate?

A. risk seeking

B. risk neutral

C. risk averse

D. risk mitigation

Correct Answer: A

Explanation
A utility function is graphed with utility on the y-axis and the variable driving utility (generally wealth) along the x-axis.
A concave utility function, ie a function with a downward sloping curve, indicates risk aversion. A convex utility function indicates a risk seeking attitude and a straight line (ie no curvature) indicates a risk neutral attitude.

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