This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: If two investments have the same level of risk, a rational investor will choose the investment with ... (Read 112 times)

roselinechinyere27m

  • Hero Member
  • *****
  • Posts: 557
on: Jul 10, 2018
If two investments have the same level of risk, a rational investor will choose the investment with the higher expected rate of return.
 
  Indicate whether the statement is true or false.

Question 2

What are the two investment rules identified in the text? Evaluate the validity of the following statement and justify your reasoning. Investors do not like risk and will always choose the investment with the least risk.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

janeli

  • Sr. Member
  • ****
  • Posts: 346
Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: TRUE

Answer to Question 2

Answer: The two rules identified by the author are: 1. If two investments have the same expected return and different levels of risk, the investment with the lower risk is preferred. 2. If two investments have equal risk, the investment with the higher expected return is preferred.

As for the statement, it is true that investors don't like risk to the extent that they do not willingly accept greater risk without increased expected return. That does not imply that investors will always choose the investment with the least amount of risk. An investor may choose an investment with greater risk if the reward-to-risk trade-off is favorable.


roselinechinyere27m

  • Member
  • Posts: 557
Reply 2 on: Jul 10, 2018
Gracias!

adf223

  • Member
  • Posts: 304
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Only one in 10 cancer deaths is caused by the primary tumor. The vast majority of cancer mortality is caused by cells breaking away from the main tumor and metastasizing to other parts of the body, such as the brain, bones, or liver.

Did you know?

The word drug comes from the Dutch word droog (meaning "dry"). For centuries, most drugs came from dried plants, hence the name.

Did you know?

In 1835 it was discovered that a disease of silkworms known as muscardine could be transferred from one silkworm to another, and was caused by a fungus.

Did you know?

The eye muscles are the most active muscles in the whole body. The external muscles that move the eyes are the strongest muscles in the human body for the job they have to do. They are 100 times more powerful than they need to be.

Did you know?

In 1844, Charles Goodyear obtained the first patent for a rubber condom.

Nuclear division at the DNA level Nuclear division at the DNA level
Reduce Risk of Unintentional Injury Reduce Risk of Unintentional Injury
The level in the coolant recovery system raises and lowers with engine temperature. The level in the coolant recovery system raises and lowers with engine temperature.
Risk Factors for NSAID-Induced Gastrointestinal Ulcers Risk Factors for NSAID-Induced Gastrointestinal Ulcers
Keeping your feelings to yourself may increase your stress level Keeping your feelings to yourself may increase your stress level
Maternal age is the major risk factor for autosomal trisomies of all types. By age 42, about one in Maternal age is the major risk factor for autosomal trisomies of all types. By age 42, about one in
Video: T cell receptors

For a complete list of videos, visit our video library