Should a person who is risk averse hold a portfolio with no stock and only bonds? Explain
Not necessarily. Historically bonds have had a lower risk, but pay a lower return. The risk of holding stocks is greater, but historically the return has been higher. A risk adverse person may believe the potential rewards are high enough to offset the risk.
You might also like to view...
The economic way of thinking suggests competition and cooperation are
A) incompatible. B) mutually destructive. C) present in any society. D) only present in a capitalist market economy.
The Japanese yen will appreciate against the dollar if
A) U.S. residents demand more Japanese goods. B) U.S. residents demand fewer Japanese goods. C) Japanese residents demand more U.S. goods. D) none of the above.
What role might discrimination play in accounting for income inequality?
What will be an ideal response?
What does it mean to say economics is an empirical science, and how is this related to the question of deciding on the usefulness of a model?
What will be an ideal response?