An investor who wants and needs to earn a higher rate of return could attempt to do so by:0000both taking more financial risk and increasing the liquidity of the asset.taking more financial risk.requiring a high degree of marketability.increasing the liquidity of the asset.

Investors use the rate of return to evaluate how profitable an investment is. A high rate indicates…

Answered: An investor who wants and needs to earn…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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In a few sentences, answer the following question as completely as you can. According to the CAPM, the expected return on a risky asset depends on three components. Describe each component, and explain the role of each one in determining expected return.
Risk and Return: Introduction Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment's risk, the-Select-the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk ; investors dislike risk and require -Select- Vrates of return as an inducement to buy riskier securities. A represents the additional compensation investors require for bearing risk; it is the difference betweer the expected rate of return on a given risky asset and that on a less risky asset. An asset's risk can be considered in two ways: On a stand-alone basis and in a portfolio context. -Select- -Select-
Which of the following statements is true? Group of answer choices The Principle of Diversification states that investors are better off by investing in one asset. The Principle of Diversification states that investors are better off by investing in different types of assets. The Principle of Diversification states that investors are better off by investing in risk-free assets. The Principle of Diversification states that investors are better off by investing in an industry of their choice.

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An investor who wants and needs to earn a higher rate of return could attempt to do so by: both taking more financial risk and increasing the liquidity of the asset. taking more financial risk. requiring a high degree of marketability. increasing the liquidity of the asset.