# Why a Quadratic Utility Function will imply an investor's utility function [closed]

1. Explain why a quadratic utility function

U(W) = W – bW2/2, b > 0 will imply that an investor’s utility function will be a function of the mean return and the variance of his portfolio. Show why this utility function implies decreasing risk-aversion.

## closed as off-topic by LocalVolatility, Chris Taylor, Bob Jansen♦Feb 6 at 10:16

This question appears to be off-topic. The users who voted to close gave this specific reason:

• "Basic financial questions are off-topic as they are assumed to be common knowledge for those studying or working in the field of quantitative finance." – LocalVolatility, Chris Taylor, Bob Jansen
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• This seems like a homework question. What have you tried so far? – skoestlmeier Feb 6 at 7:05