(a) A risk aversion strategy (b) A risk-taking strategy (c) The framing effect

Answered: (a) A risk aversion strategy (b) A…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(a) A risk aversion strategy (b) A risk-taking strategy (c) The framing effect

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Risk aversion strategy refers to the strategy that protect the capital from the loss over the potential greater return. For example, there are two investment opportunity available. First opportunity is that the person can invest in government bond that gives solid lower return. Second opportunity i that the investor can invest in stock market which gives higher return but possess capital loss. The risk aversion strategy is to select eh government bond which avoids the risk of capital loss.

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