Question $2$

$[17$ Marks$]$

Individuals tend to exhibit different tolerance levels when relating to$,$ appetite for and attitude towards risk. Risk tolerance refers to what an individual considers to be acceptable or unacceptable outcomes which deviate from the expected. Risk appetite refers to how much risk an individual is willing to accept.

Required

a$)$ Differentiate between a risk$-$averse and risk$-$seeking individual and advise which risk category a financial manager falls into.

$(10$ Marks$)$

b$)$ Murunwa Investments is seeking to invest R$25$ million into either of the following projects, namely the White Project and the Black Project.

$\backslash$table$[[$Annual rate of return,White Project,Black Project$],[$Worst case,$6\%,3\%$