Both Investors and Gamblers Take on Risk

question 32

Multiple Choice

Both investors and gamblers take on risk. The difference between an investor and a gambler is that an investor ________.

• A) is normally risk neutral
• B) requires a risk premium to take on the risk
• C) knows he or she will not lose money
• D) knows the outcomes at the beginning of the holding period

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Definitions:

Intoxicant

A substance that causes excitement or diminished control over faculties, typically by means of alcohol or drugs.

Production Function

An equation representing the relationship between inputs used in production and the output produced from these inputs.

Labor

The physical and mental effort used in the production of goods and services, often considered a primary factor of production.

Machines

Tools or devices designed to perform specific tasks or functions, often powered by electricity or mechanical force.