Answer: risk seeking

## Explanation This question tests the understanding of risk preferences in portfolio management. **Key Concepts:** 1. **Risk Averse**: An investor who prefers a certain payoff over an uncertain payoff with the same expected value. They require compensation (risk premium) for taking on risk. 2. **Risk Neutral**: An investor who is indifferent between a certain payoff and an uncertain payoff with the same expected value. They only care about expected value, not risk. 3. **Risk Seeking**: An investor who prefers an uncertain payoff over a certain payoff with the same expected value. They enjoy taking risks and may even accept lower expected returns for the thrill of uncertainty. **Analysis:** - The investor is comparing two options: - Option 1: Guaranteed payoff of $50 (certain outcome) - Option 2: Uncertain expected payoff of $50 (same expected value but with risk) - The investor **prefers** the uncertain payoff over the guaranteed payoff - This behavior demonstrates a preference for risk-taking **Conclusion:** Since the investor prefers the uncertain payoff (with the same expected value of $50) over the guaranteed $50, they are exhibiting **risk-seeking** behavior. Risk-averse investors would prefer the guaranteed payoff, and risk-neutral investors would be indifferent between the two options. **Answer: C (risk seeking)**

Author: LeetQuiz .