What Type(s)of Individual Will Always Choose a Risk-Free Basket When

question 6

Multiple Choice

What type(s) of individual will always choose a risk-free basket when offered a bet at fair odds?

• A) A risk-neutral individual.
• B) A risk-averse individual.
• C) A risk-preferring individual.
• D) Risk-neutral and risk-averse individuals.

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how spread out the numbers are from the mean.

Mean

The arithmetic average of a set of values, calculated by adding all the values together and then dividing by the number of values.

Standard Deviations

An indicator of how much the values in a collection differ from each other.

Probability Density Functions

Mathematical functions that describe the likelihood of a continuous random variable taking on a particular value.