Part 1: Utility in finance vs utility in economics (10 marks)

The indifference curve in finance is positively sloped, while the indifference curve in economics1 is negatively sloped - why? Explain in detail the figures of the curves.

Part 2: Risk assessment for stock market investment (10 marks)

You decided to try your luck in the stock market by investing in stocks of a single company. Your friend is an investor in the stock market for several years and has investments in a large diversified portfolio. You thought it would be good to discuss with your friend and get some information about a stock market investment. Your friend advised you to invest in stocks of XYZ Co. and said that he was also considering including stocks of XYZ Co. in his diversified portfolio. Clearly explain how your approach/method of risk assessment/computation of the returns of XYZ stocks differs from that of your friend who was considering including stocks of XYZ Co. in his diversified portfolio.