You have saved a total of $200,000 over the past several years. Jane, a trusted business associate, recently approached you with an offer. She has offered you a partnership in a new firm that she expects to be exceedingly profitable. Your initial investment in the partnership would be $125,000. However, Jane cannot give you any odds on that success occurring. You have decided to keep your $125,000 and forego this opportunity simply because you don't know the probability of success. Which one of the following behavior characteristics do you have?
A) Aversion to ambiguity.
B) Recency bias.
C) Sentiment-based risk aversion.
D) Clustering illusion.
E) Money illusion.

Question

Quizplus · Accepted Answer

Choosing not to invest due to the uncertainty or lack of information about the probability of success demonstrates an aversion to ambiguity. This behavior is characterized by a preference for situations with known risks over those with unknown risks.

You Have Saved a Total of $200,000 Over the Past