Scenario: Three investment options are available in a market. All three options provide the same expected rate of return but have different levels of risk associated with them. Investing in Option A is the riskiest, while investing in Option C is the safest. Option B has a moderate level of risk associated with it.
-Refer to the scenario above.Which investment option will a risk-neutral individual choose?

Question

Quizplus · Accepted Answer

A risk-neutral individual would be indifferent to investing in any of the three options as they are only concerned with the expected rate of return and not the level of risk associated with the investment. As long as all three options provide the same expected rate of return, a risk-neutral individual would be willing to invest in any of them.

Scenario: Three Investment Options Are Available in a Market