Question

Which of the following statements is(are) true?

I) Risk-averse investors reject investments that are fair games.
II) Risk-neutral investors judge risky investments only by the expected returns.
III) Risk-averse investors judge investments only by their riskiness.
IV) Risk-loving investors will not engage in fair games.

Answer 1

Answer: Statement 1 and 2

Step-by-step explanation: Risk averse investors are investors that are more concerned about the risk of the investment rather than its returns. These investors funds those investment that have lower known risk with lower returns rather than one with unknown risk and higher returns.

On the other hand, risk neutral investors are those investors which do not care about the risk factor of an investment and are insensitive to the level of risk an investment have.