Which of the following statements regarding risk-averse investors is true?
A)They only care about the rate of return.
B)They accept investments that are fair games.
C)They only accept risky investments that offer risk premiums over the risk-free rate.
D)They are willing to accept lower returns and high risk.
E)A and B.

Question

Quizplus · Accepted Answer

Risk-averse investors are not willing to accept high risk without adequate compensation in the form of a risk premium. They prioritize minimizing risk over maximizing returns and will only accept risky investments if they offer a higher return than the risk-free rate. Option A is incorrect as the rate of return alone is not the sole concern for risk-averse investors. Option B is incorrect as they avoid fair games or investments with unknown probabilities. Option D is incorrect as they are not willing to accept low returns for high risk.

Which of the Following Statements Regarding Risk-Averse Investors Is True