The Principle of Risk Aversion Can Best Be Described As

question 57

Multiple Choice

The principle of risk aversion can best be described as:

• A)the observation that investors are unwilling to acquire very risky securities regardless of their risk premiums.
• B)the hypothesis that people always prefer investments with less risk to those with more risk if the expected returns are equal.
• C)the observation that risky securities usually offer unattractive expected returns when the possibility of loss is considered.
• D)All of the above

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Definitions:

Physiological Arousal State

A condition of heightened physiological activity, involving increased heart rate, sweat production, and alertness, typically as a response to stimuli.

Basic Forms Of Arousal

Fundamental physiological and psychological states of being alert, which can be triggered by stimuli that provoke excitement, fear, or sexual interest.

Excitation Transfer

A psychological theory proposing that arousal from one stimulus can be transferred and added to arousal from a second stimulus, intensifying the response to the second stimulus.

High, Narrow Bridge

A bridge that is significantly elevated above ground or water level and has a slender width, potentially inducing fear of heights or falling.