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    Question

    Which of the following best describes a risk averse investor?

    A An investor who assumes more risk only if compensated by higher expected return Correct Answer Incorrect Answer
    B An investor who chooses preservation of capital over potential high returns Correct Answer Incorrect Answer
    C An investor who chooses potential higher return over preservation of capital Correct Answer Incorrect Answer
    D An investor who avoids low risk assets for unknown risks Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    A  risk averse  investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks. The term risk-averse describes  the investor who chooses the preservation of capital over the potential for a higher-than-average return

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