Question 11

(Multiple Choice)

An investor is faced with the option of putting money into a savings account with a 2% interest rate that is guaranteed or a stock account that has a higher expected return rate of 6% but is not guaranteed. The investor chooses the stock account because they enjoy the excitement of the possibility of a higher payoff. This is an example of


A) risk-aversion and discounting.
B) neutrality only.
C) risk-sensitivity.
D) discounting only.
E) risk-sensitivity and being risk-prone.

Answer