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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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