CSI IFC Dumps Questions Answers

Loss-averse investors prioritize minimizing potential losses over maximizing gains. The option with a 25% chance of gaining $2,000 and a 75% chance of losing nothing has the lowest loss potential, making it the preferred choice. The feedback from the document states:

"The loss-averse investor will choose a lower potential of loss over a more rational choice. In this example, a 25% chance of gaining $2,000 and a 75% chance of losing nothing has the lowest possible loss potential, and will typically be the statement selected by the loss-averse investor."

The nominal rate of return is the return before adjustment for inflation, which is given as 2%. The real rate of return would be adjusted for inflation (2% - 1.5% = 0.5%), but the question asks for the nominal rate. The feedback from the document states:

"It is important to consider the effects of inflation on investments because we can isolate the difference between nominal and real returns. Investors are more concerned with the real rate of return – the return adjusted for the effects of inflation. A nominal return is a return that has not been adjusted for the impact of inflation. The approximate real rate of return is calculated as: Real Return = Nominal Rate - Annual Inflation Rate."