Which of the following BEST describes the utility of a risk?

Which of the following BEST describes the utility of a risk?
A . The finance incentive behind the risk
B . The potential opportunity of the risk
C . The mechanics of how a risk works
D . The usefulness of the risk to individuals or groups

View Answer

Answer: D

Explanation:

The utility of the risk describes the usefulness of a particular risk to an individual. Moreover, the same risk can be utilized by two individuals in different ways. Financial outcomes are one of the methods for measuring potential value for taking a risk. For example, if the individual’s economic wealth increases, the potential utility of the risk will decrease.

Incorrect Answers:

A: Determining financial incentive is one of the method to measure the potential value for taking a risk, but it is not the valid definition for utility of risk.

B: It is not the valid definition.

C: It is not the valid definition.