Risk aversion implies that
A) reckless drivers will pay higher insurance premium than safe drivers.
B) for the same returns, investors prefer low risk investment to high risk investment.
C) People with higher default risk must pay higher interest rates than people with good credit.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

Risk aversion implies that individuals prefer to avoid risk when possible, which is reflected in all the provided scenarios: higher premiums for higher-risk drivers, preference for lower-risk investments for the same return, and higher interest rates for those with a higher default risk.

Risk Aversion Implies That