Which of the following describes the attribute of a risk averse investor?
A) An investor that makes decisions based on the popularity of assets.
B) An investor that makes decisions based on the expected return of assets.
C) An investor that makes decisions based on the advice of financial planners.
D) An investor that makes decisions based on the expected return and the degree of risk of assets.
E) An investor that makes decisions based on the credit rating of assets.

Question

Quizplus · Accepted Answer

A risk averse investor is one who is more concerned with the potential loss of investment than the potential gain. Such an investor would, therefore, make decisions based on the expected return and the degree of risk of assets, which is the best description provided by option D. Option A is incorrect because it describes an investor who makes decisions based on popularity, which is not related to risk-aversion. Option B is incorrect because it describes an investor who only considers expected returns, ignoring risks. Option C is incorrect because it suggests that the investor wholly relies on the advice of planners without considering individual risk profiles. Option E is incorrect because credit rating may not necessarily help an investor to determine the risks associated with an asset.

Which of the Following Describes the Attribute of a Risk