A Risk-Averse Investor Versus a Risk-Neutral Investor

question 38

Multiple Choice

A risk-averse investor versus a risk-neutral investor:

• A) will never take a risk, while the risk neutral investor will.
• B) needs greater compensation for the same risk versus the risk neutral investor.
• C) will take the same risks as the risk neutral investor if the expected returns are equal.
• D) needs less compensation for the same risk versus the risk neutral investor.

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Definitions:

Resource Consumption

The amount of resources used during a process, such as raw materials, energy, or labor.

Activity Rate

The cost incurred per unit of activity, used in activity-based costing to allocate overhead costs to products.

Overhead Cost

Expenses related to the operation of a business that are not directly tied to a specific product or service, such as rent, utilities, and administrative salaries.

Activity Cost Pool

A grouping of all the costs related to a particular business activity, facilitating more accurate allocation of overhead costs to products or services.