ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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those who prefers investments with higher risk
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attitude wherein an investor chooses securities or investments based only on their expected returns disregarding or removing the risks
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can even sacrifice some expected return when choosing a riskier investment
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investor will not make the riskier investment unless it offers a higher expected return to compensate the investor for bearing the additional risk
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Detailed explanation-1: -Definition: A risk averse investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks. In other words, among various investments giving the same return with different level of risks, this investor always prefers the alternative with least interest.
Detailed explanation-2: -A person is said to be: risk averse (or risk avoiding)-if they would accept a certain payment (certainty equivalent) of less than $50 (for example, $40), rather than taking the gamble and possibly receiving nothing.
Detailed explanation-3: -A risk premium is the higher rate of return you can expect to earn from riskier assets like stocks, instead of investing in a risk-free assets like government bonds.
Detailed explanation-4: -Risk-averse people naively expect that success will simply to come to them. Risk-takers understand that success requires creative, strategic pursuit. Your goal is to get people to act, and wholeheartedly embracing risk is the only prescription for overcoming complacency, apprehension, and fear of failure.