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:

Willingness to Pay

The maximum amount an individual is prepared to spend on a good or service, reflecting their perceived value of the product.

Oral Auction

A traditional auction where bids are announced by participants verbally until the highest bid is reached.

True Values

The actual, undistorted measures or worth of an item, free from biases or errors.

Oral Auction

A live auction where bids are made through spoken communication amongst bidders.