Which of the following best describes a risk averse investor.
A) An investor who will accept higher risk only if there is a higher guaranteed return
B) An investor seeking only investments without risk.
C) An investor who seeks to minimize the amount of risk needed to achieve their return objective.
D) An investor who is not willing to accept greater risk to achieve higher potential returns.
E) An investor whose desire to avoid risk can only achieve moderate returns on their portfolio.

Question

Quizplus · Accepted Answer

A risk averse investor seeks to minimize the amount of risk needed to achieve their return objective. They are willing to accept some level of risk, but are not willing to take on excessive risk in pursuit of higher potential returns (option D). They do not necessarily seek investments without risk (option B), as this is not realistic in the investing world. They may accept higher risk if there is a higher guaranteed return (option A), but this is not the defining characteristic of a risk averse investor. Option E is not accurate, as a risk averse investor may still achieve significant returns if they are able to effectively manage risk.

Which of the Following Best Describes a Risk Averse Investor