Steve holds 100 shares of a company that currently trade at $10.There is a 50 percent probability of the market price increasing to $15 within the next quarter.If Steve waits for the market price of shares to increase before selling them off, he would be considered risk averse.

Question

Quizplus · Accepted Answer

Steve's willingness to wait for a potential increase in the market price of his shares, despite the uncertainty, indicates a willingness to take on risk for a higher return, which is contrary to risk aversion. Risk-averse individuals typically prefer certainty and would be more inclined to secure current values rather than gamble on future increases.

Steve Holds 100 Shares of a Company That Currently Trade