Define risk aversion

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1. What does it mean when we say the owners of a firm are entitled to the "residual income" of a firm? Is this a good thing or a bad thing? Explain.

2. Define risk aversion. Are there different degrees of risk aversion among different investors? Explain. Is there any evidence we can observe in financial markets that would support the notion that these markets are dominated by risk averse individuals? Explain.

Reference no: EM131798488

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