Given the Choice Between a Sure-Thing Option and a Gamble

question 1

Multiple Choice

Given the choice between a sure-thing option and a gamble option with the same expected payoff, a____________ person will choose gamble.

• A)risk averse
• B)risk loving
• C)risk neutral
• D)risk avoiding

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Definitions:

Expense Ratio

The annual fee expressed as a percentage of assets under management that investors pay for mutual fund or ETF operations and administration.

Indexed Funds

Mutual funds or exchange-traded funds (ETFs) that aim to replicate the performance of a specific index by investing in the stocks or securities that compose that index.

Bid-ask Spread

The difference between the highest price that buyers are willing to pay for an asset (bid) and the lowest price that sellers are willing to accept (ask).

Broker Fee

Fees charged by a broker for the services they provide, such as executing trades or providing investment advice.