If Two Investments Have the Same Expected Return,a Rational Investor

question 11

True/False

If two investments have the same expected return,a rational investor will choose the investment with the greater risk in an effort to get a much larger return.

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Definitions:

Factor Model

A way of decomposing the factors that influence a security’s rate of return into common (systematic) and firm-specific influences.

Firm-specific Events

Events that directly affect a company's operations, financial performance, or stock price, independent of the market or economic conditions.

Macroeconomic Events

Large-scale economic events that affect the economy on a national or global level, such as inflation, unemployment, or fiscal policies.

Unsystematic Risk

The segment of risk that is unique to a specific company or industry, also known as diversifiable risk, which can be mitigated through diversification.