True. The certainty equivalent is the certain dollar amount a risk-averse decision-maker would accept in order to avoid a gamble altogether is a correct statement.
What is risk averse person?
If a person prefers a certain reward to a gamble, such a person is considered to be risk averse. The tendency to avoid risk is called risk aversion. The investor who favors capital preservation over the possibility of earning a higher-than-average return is referred to as risk-averse.
They favor investing in liquid assets. That is, regardless of the current state of the market, they have access to their money when they need it. Municipal and corporate bonds, certificates of deposit, and savings accounts are typically preferred by risk-averse investors.
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