False: Someone who is risk averse favors the choice with the smallest prize if the anticipated value of all alternatives is maintained constant.
Risks are avoided by a risk-averse investor. He or she steers clear of high-risk endeavors and opts for those that promise a profit. These investors choose to invest in index funds, debentures, and government bonds. Degrees of risk aversion are determined by the extra marginal return a create price to tolerate more risk, in accordance with modern portfolio theory (MPT).
The anticipated utility hypothesis accounts for the possibility that people may be risk-averse, which would cause them to decline a fair bet People who are risk averse are said to have concave utility functions and declining marginal wealth utility.
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