Which of the Following Statements Is (Are)true About Risk Aversion

question 34

Multiple Choice

Which of the following statements is (are) true about risk aversion?

• A)Risk-averse investors would be indifferent between investing in a risk-free investment that will earn 4% or a risky asset that has a 50% chance of earning 8% and a 50% chance of
• Returning 0%.
• B)Risk-averse investors should accept only fair bets.
• C)The effective risk-aversion of a group of investors is less than the risk aversion of any single investor.
• D)Both A and B are true.

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Definitions:

Extra Paychecks

Additional salary payments beyond the regular payment schedule, often as bonuses or for special occasions.

Relies

The act of depending on or trusting in something or someone for support or help.

Bonus Pay

A pay plan that rewards employees for recent performance rather than historical performance.

Extrinsic Reward

A reward or incentive provided by an external source, such as money, grades, or recognition, to motivate behavior or performance.