Answer (C) is correct . An indifference curve represents combinations of portfolios having equal utility to the investor. Given that risk and returns are plotted on the horizontal and vertical axes, respectively, and that the investor is risk averse, the curve has an increasingly positive slope. As risk increases, the additional required return per unit of additional risk also increases. The steeper the slope of an indifference curve, the more risk averse an investor is. The higher the curve, the greater is the investor’s level of utility.
Answer (A) is incorrect because The slope is less steep if the investor is less risk averse. The increase in the required additional return per unit of additional risk is lower.
Answer (B) is incorrect because The higher the curve, the greater is the investor’s level of utility. Moreover, the slope is positive, not negative.
Answer (D) is incorrect because The slope is increasingly positive.
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