Suppose Option a Has a Higher Variance Than Option B

question 79

Multiple Choice

Suppose option A has a higher variance than option B.Which of the following statements is,in general,true?

• A)A risk-neutral person is indifferent between options A and B.
• B)A risk-averse person prefers option B to option A.
• C)A risk-averse person prefers option A to option B.
• D)There is insufficient information to determine which is true.

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Definitions:

Penalties

Punishments or fines imposed for breaking a law, rule, or contract.

Inflation-adjusted Amount

A monetary value converted to reflect changes in purchasing power due to inflation, ensuring comparison over time is more accurate.

Registration Statement

A set of documents, including financial statements and a prospectus, filed with a securities regulatory body to register new securities for public sale.

CFO

Chief Financial Officer, an executive responsible for managing the financial actions of a company.