Concerning an investment project which of the following is TRUE?
A) A risk-neutral individual is more likely to invest than a risk-averse individual.
B) A risk-neutral individual is more likely to invest than a risk-loving individual.
C) A risk-neutral individual is less likely to invest than a risk-averse individual.
D) Not enough information is given.

Question

Quizplus · Accepted Answer

A risk-neutral individual is indifferent to taking risks and therefore their investment decision is based solely on the expected return. In contrast, a risk-averse individual may not invest in a project with a high expected return if the associated risk is high. Therefore, a risk-neutral individual is more likely to invest than a risk-averse individual. There is no information given regarding a risk-loving individual, so we cannot determine whether they are more or less likely to invest than a risk-neutral individual.

Concerning an Investment Project Which of the Following Is TRUE