Assume that an investor is offered a choice of a risk-free government bond or a high-risk corporate stock.Further assume that the expected return is the same for both.According to one of the axioms of finance,which investment would be chosen?
A) the corporate stock
B) the government bond
C) neither, the investor would be indifferent
D) none of the above

Question

Quizplus · Accepted Answer

One of the axioms of finance is that investors prefer higher returns with less risk. In this scenario, the government bond is perceived as less risky than the high-risk corporate stock, hence the investor would choose the government bond as it offers the same expected returns but with less risk. Therefore, the best choice would be option B) the government bond.

Assume That an Investor Is Offered a Choice of a Risk-Free