A risk-neutral individual will make investment decisions purely based on net present value because

Question

Quizplus · Accepted Answer

A risk-neutral individual evaluates investments based on expected outcomes without weighting them for risk, which corresponds to having a utility function that is a linear function of wealth. This means their decision-making is based on the expected monetary value of an investment, such as the net present value, rather than considerations of risk or utility derived from risk-taking.

A Risk-Neutral Individual Will Make Investment Decisions Purely Based on Net