Suppose There's an 80% Chance of a Stock Rising by 20

question 5

Multiple Choice

Suppose there's an 80% chance of a stock rising by 20% and a 20% chance of it falling by 40%.Which type of investor would prefer an investment with a guaranteed return of 5%?

• A) risk loving investor
• B) risk neutral investor
• C) risk averse investor
• D) Risk is not relevant in this example.

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Definitions:

Life Cycle

The series of changes in the life of an organism, including reproduction, growth, and eventually death.

Biennial

Plants or events occurring every two years, particularly in the context of plant growth cycles.

Monocot

A classification of flowering plants (angiosperms) characterized by seeds with a single embryonic leaf or cotyledon.

Secondary Tissues

Plant tissues that arise from secondary growth, including secondary xylem (wood) and phloem, contributing to increased thickness of stems and roots.