Asked by
Matthew Osberg
on Nov 16, 2024Verified
The fact that we observe a trade-off between risk and return is puzzling to economists, because that observation conflicts with the notion that most people are risk averse.
Risk Averse
A descriptor for individuals or entities that prefer to minimize exposure to risk and avoid uncertain outcomes.
Risk and Return
The principle that potential return on investment rises with an increase in risk. Higher risk is associated with the greater probability of higher return and vice versa.
- Comprehend the principle of risk aversion and its impact on decision-making processes.
- Grasp the significance of implementing diversification to reduce investment risk in portfolios.
Verified Answer
BC
Learning Objectives
- Comprehend the principle of risk aversion and its impact on decision-making processes.
- Grasp the significance of implementing diversification to reduce investment risk in portfolios.
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