Which of the following investors should be willing to pay the highest price for an asset?
A) An investor with a single-asset portfolio.
B) An investor with a diversified portfolio.
C) An investor who is not completely diversified.
D) An investor who is so risk-averse that he does not recognize the benefits of diversification.

Question

Quizplus · Accepted Answer

An investor with a diversified portfolio is willing to pay the highest price for an asset because diversification reduces the overall risk of the portfolio. This investor can afford to take on a bit more risk with a new asset since the impact of its volatility is minimized by the effects of other assets in the portfolio.

Which of the Following Investors Should Be Willing to Pay