Asked by Andrea Weitoschova on May 07, 2024
Verified
Which of the following statements is(are) true?I) Risk-averse investors reject investments that are fair games.II) Risk-neutral investors judge risky investments only by the expected returns.III) Risk-averse investors judge investments only by their riskiness.IV) Risk-loving investors will not engage in fair games.
A) I only
B) II only
C) I and II only
D) II and III only
E) II, III, and IV only
Risk-Averse Investors
Investors who prefer to minimize the possibility of loss, typically opting for lower-risk investments.
Risk-Loving Investors
Investors who prefer investments with higher levels of risk in anticipation of potentially higher returns.
- Identify the distinctions in investment strategies between risk-averse, risk-neutral, and risk-loving investors.
Verified Answer
MS
Mckayla SoucyMay 13, 2024
Final Answer :
C
Explanation :
I) True, risk-averse investors prefer not to engage in investments that have an expected net outcome of zero (fair games), as they prefer to avoid risk. II) True, risk-neutral investors are indifferent to risk and make decisions based solely on expected returns, not the risk involved. III) False, risk-averse investors consider both the risk and the expected returns of investments, not just their riskiness. IV) False, risk-loving investors are attracted to risk and may engage in fair games for the possibility of higher returns.
Learning Objectives
- Identify the distinctions in investment strategies between risk-averse, risk-neutral, and risk-loving investors.