If the market interest rate is 10 percent and a decision maker's risk-adjusted discount rate is 12 percent, then the decision maker
A) is risk averse.
B) has a certainty-equivalent coefficient that is greater than one.
C) is risk neutral.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

A decision maker with a risk-adjusted discount rate higher than the market interest rate is risk averse, as they require a higher return to compensate for the risk.

If the Market Interest Rate Is 10 Percent and a Decision