Which of the Following Is True of Risk Aversion

question 186

Multiple Choice

Which of the following is true of risk aversion?

• A) Greater risk aversion results in lower required returns for each level of risk.
• B) A reduction in risk aversion causes the required return for each level of risk to increase.
• C) In general, widely shared expectations of hard times ahead tend to cause investors to become less risk averse.
• D) Changes in risk aversion, and therefore shifts in the SML, result from changing preferences of investors.

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Definitions:

Geographic Market

An area or region wherein a company operates and competes for customers, often defined by political boundaries or population demographics.

Sherman Act

A U.S. antitrust law passed in 1890 that prohibits monopolistic business practices and promotes competition.

Price-Fixing Scheme

An illegal arrangement between parties to set the price of goods or services at a certain level, often to limit competition.

Sherman Act

An anti-monopoly U.S. legislation which outlaws monopolistic business practices.