Which of the Following Investors Should Be Willing to Pay

question 39

Multiple Choice

Which of the following investors should be willing to pay the highest price for an asset?

• A) An investor with a single-asset portfolio.
• B) An investor with a diversified portfolio.
• C) An investor who is not completely diversified.
• D) An investor who is so risk-averse that he does not recognize the benefits of diversification.

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Definitions:

Limited Information Processing

A situation where the ability to interpret, analyze, and act upon information is constrained by cognitive or situational factors.

Satisficing

A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution.

Tacit Knowledge

Knowledge gained through personal experience and context, often difficult to articulate or transfer to others, as opposed to explicit knowledge which can be readily documented.

Intuition

The ability to understand something immediately, without the need for conscious reasoning.