Investors in New Ventures Demand High Rates of Return for Several

question 13

Multiple Choice

Investors in new ventures demand high rates of return for several reasons.Which of the following is NOT a reason?

• A) New ventures are extremely risky.
• B) Investors in new ventures are able to diversify their risks fairly well.
• C) Entrepreneurs have information about new ventures that they don't share with investors, allowing them an unfair advantage.
• D) Entrepreneurs are often overoptimistic when they project the future prospects of their new ventures.
• E) Unlike investors in the stock market who are largely passive, investors in new ventures provide several types of assistance to new ventures and they want compensation for this assistance.

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Definitions:

Self-esteem

The subjective evaluation of one's own worth or value.

Self-perception

A theory that people develop attitudes and opinions by observing their own behavior and concluding what attitudes must have caused them.

Upward Social Comparison

The process of comparing oneself with others who are perceived to be better off or superior in some way.

Better than Average Effect

A cognitive bias where individuals overestimate their own qualities and abilities compared to others.