Final answer:
Risk and reward are important concepts in finance. A risk-averse investor prioritizes minimizing risk and seeks low-risk investments.
Step-by-step explanation:
In the world of finance, risk and reward are two important concepts that investors need to consider when making investment decisions. Risk refers to the uncertainty or potential for loss associated with an investment, while reward refers to the potential gain or return on investment. These two concepts are often interconnected, as investments with higher potential returns often come with higher levels of risk.
A risk-averse investor is someone who prefers to minimize or avoid risk as much as possible. They prioritize the preservation of capital over the potential for higher returns. Risk-averse investors typically opt for low-risk investments, such as government bonds or certificates of deposit, which offer lower returns but are considered relatively safe.