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Erik is an investor with $ 5 , 0 0 0 available for investment. He has the following three investment possibilities from which to choose:

Erik is an investor with $5,000 available for investment. He has the following three investment possibilities from which to choose:
\table[[Option,Scenarios],[1,Keep the $5,000 in cash for one year.],[2,Invest in a friend's business with a],[50% chance of getting $10,000 after one year and a,],[50% chance of getting nothing.,],[3,Invest in a relative's business with a],[30% chance of getting $15,000 after one year,,],[20% chance of getting $2,500 after one year,,],[50% chance of getting nothing.,]]
Suppose Erik cares about the risk involved in options 2 and 3, and decides to select option 1 because it has no risk. Which of the following statements would be true about Erik?
He is risk-averse.
He is risk-neutral.
He is risk-loving.
None of these descriptions is accurate.
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