Attitude towards Risk
Different kind of people has different kind of attitude towards risk.
We must keep in mind “risky investments must offer higher expected return, i.e. risk premium, than less risky investments in order for people to buy and hold them”
Risk Averse
This term is applied to an investor who demands a higher expected return, the higher the risk.
Risk indifference
This term is applied to an investor who demands an equal expected return, the equal the risk.
Risk preference
This term is applied to an investor who demands a more higher expected return, the more higher the risk.
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