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Risk Preference

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Risk Preference

  • This topic has 2 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • September 26, 2021 at 4:54 pm #636531
    Syed Ahsan Ali
    Participant
    • Topics: 136
    • Replies: 85
    • ☆☆☆

    Could you please clear my doubt regarding risk & uncertainty? Are these below all true?

    1) Risk seekers are those investors who are interested in the best possible outcome from the best options available?

    2) Risk Avoider are those investors who are interested in the worst possible outcome from the best options available?

    3) Risk Neutral are those investors who are interested in the average outcome from all the options available?

    4) All these attitudes are related to risk which is used to mitigate the risk in the decision-making but what about whether these approaches deal with uncertainty or not?

    Does the examiner use risk & uncertainty interchangeably? And all these approaches are used to deal with both of them?

    September 27, 2021 at 8:25 am #636554
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    What you have written for 1 to 3 is correct.

    For 4, none of the approaches mitigate the risk. It is just that the attitude to risk determines the way the decision is made.

    The examiner does use risk and uncertainty interchangeable. Strictly risk is when we know the probabilities of different outcomes whereas uncertainty is where we do not know the probabilities.

    September 27, 2021 at 8:25 am #636555
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    What you have written for 1 to 3 is correct.

    For 4, none of the approaches mitigate the risk. It is just that the attitude to risk determines the way the decision is made.

    The examiner does use risk and uncertainty interchangeable. Strictly risk is when we know the probabilities of different outcomes whereas uncertainty is where we do not know the probabilities.

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