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Questions and Answers
According to portfolio theory, a risk averse investor prefers lower returns with known risks rather than higher returns with unknown risks.
According to portfolio theory, a risk averse investor prefers lower returns with known risks rather than higher returns with unknown risks.
- True (correct)
- False
What is the alternative definition of risk mentioned in the text?
What is the alternative definition of risk mentioned in the text?
- The uncertainty of future outcomes
- The probability of an adverse outcome (correct)
- The relationship among investments
- The combination of risk and return
What is the relationship between risk and return in creating an optimum investment portfolio?
What is the relationship between risk and return in creating an optimum investment portfolio?
- Risk and return are not related
- Higher risk leads to higher return
- Lower risk leads to higher return (correct)
- Risk and return should be balanced
Are all investors considered to be risk averse according to the text?
Are all investors considered to be risk averse according to the text?
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What is the definition of risk in most financial literature?
What is the definition of risk in most financial literature?
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