For the risk-averse financial manager,the more risky a given course of action,the higher the expected return must be.

Question

Quizplus · Accepted Answer

The risk-averse financial manager prefers low-risk investments and therefore requires a higher expected return when considering a more risky course of action to compensate for the increased risk. This is because they do not want to take on additional risk without being adequately compensated for it. Higher returns are the compensation that makes taking on additional risk more acceptable.

For the Risk-Averse Financial Manager,the More Risky a Given Course