Bob invests $50 in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0. From this information we can conclude that Bob is NOT
A)risk preferring.
B)risk neutral.
C)risk averse.
D)rational.

Question

Quizplus · Accepted Answer

If Bob was risk preferring, he would choose the investment regardless of the uncertainty of the outcome. If he was risk neutral, he would be indifferent to the investment. However, since Bob invests in an investment with a 50-50 chance of being worth $100 or $0, he shows signs of being risk averse. A rational investor would weigh the risks and potential rewards before making a decision, but in this case, Bob is not fully rational because of his risk-averse behavior.

Bob Invests $50 in an Investment That Has a 50