Which of the following statements about the ‘What is Risk?’ section of the lecture material based on the diagram below are TRUE:A risk-averse individual would always prefer A to B because they both offer the same expected reward while B has a higher level of risk than A.A risk-averse individual would always prefer A to C because A has a significantly lower level of risk than C.Question 2AnswerNeither of the statements are true (both are false)Only statement 1 is trueOnly statement 2 is trueBoth statements are true (neither are false)

Which of the following statements about the ‘What is Risk?’ section of the lecture material are TRUE:There is risk whenever there is some uncertainty about outcomes.A situation in which the value of an asset can either remain the same or decreases over a period of time can be described as ‘Pure Risk’.Question 1AnswerNeither of the statements are true (both are false)Only statement 1 is trueOnly statement 2 is trueBoth statements are true (neither are false)

Which of the following statements about risk aversion is TRUE?a.Risk aversion will always lead to a negative outcome.b.Ambitious people with power that can be taken away are more susceptible to risk aversion.c.Preferring a 50/50 chance of winning $200 to a guaranteed win of $50 is an example of risk aversion.d.Both (b) and (c).

Answer True/False to the following question.A risk is a statement about a probability.

1. Which of the following statements regarding risk-averse investors is true?a.They accept investments that are fair games.b.They only care about the rate of return.c.They are willing to accept lower returns and high risk.d.They only accept risky investments that offer risk premiums over the risk-free rate.

Which of the following statements about the ‘What is Risk?’, ‘Risk and Human Bias’ and ‘What is Risk Management?’ sections of the lecture material are TRUE:An individual can either lose $100 for certain (with 100% probability) or take a gamble. The gamble involves a 10% probability of losing $1,000 and a 90% probability of losing $0. A typical person exhibiting human bias would usually take the gamble, even though the rational risk-averse choice would be to take the certain loss of $100.An individual is considering how to manage the risk of damage to their motor vehicle. Four methods to manage that risk that are consistent (in any order) with the MEAT acronym would be as follows: (i) sell the motor vehicle and use public transport, (ii) always drive defensively and obey the speed limit, (iii) take out comprehensive motor vehicle insurance and (iv) set aside enough funds in a savings account for major repairs or to buy a new vehicle if necessary.Question 4AnswerNeither of the statements are true (both are false)Only statement 1 is trueOnly statement 2 is trueBoth statements are true (neither are false)