In general, what is true of people's risk aversion for changes in income that are marginal (i.e., very small changes in income)? (a) They are less risk averse. (b) Their risk aversion does not change. (c) It depends on the shape of the individual utility function. (d) They are more risk averse.

Q: hich of the following would not be acceptable as a measure of basic investment risk? a)Expected…

A: Risk is always there when you invest in stock returns and risk is volatility of returns and change…

Q: The empirical SML is too flat relative to what CAPM predicts. Researchers have focused on which two…

A: The empirical Security Market Line (SML) is a representation of the relationship between systematic…

Q: Practitioners sometimes consider the financial distress costs in their APV applications. What are…

A: The current worth of financing advantages plus the net present value of a project or business's NPV…

Q: A borrower who takes out a loan usually has better information about the potential returns and risks…

A: Effective risk management strategies and mechanisms, such as thorough due diligence and monitoring,…

Q: Which is least likely?  A. For the risk-seeking manager, no change in return would be required for…

A: Risk and return both are related to each other and depending upon the nature of managers or…

Q: What happens to the SML graph when risk aversion increasesor decreases?

A: Risk Aversion: The ability of a human being to avoid the risk and eventually reducing losses that…

Q: In general it argued that the lower of cost of market rule is supported most closely by which of the…

A: The lower of cost or market rule is related to valuing the inventory, the company should value the…

Q: Why are the net present value and the internal rate of return models superior to the payback period…

A: The net present value and internal rate of return techniques are superior to the payback method…

Q: Which of the following decision criteria is the easiest to use and very popular among investors?…

A: The capital budgeting process uses different methods to analyze the projects. Each method has…

Q: What are the real risks of an adverse financial outcome, especially in the short run?

A: Risk is the important factor of investment decisions to explain the capability of an investor to…

Q: Which of the following is correct about the security market line (SML)? Investment projects that…

A: Security market line is the graphical representation of the values of stock against the risk…

Q: If the decision is to select the alternative with the maximum profit, then the alternative with the…

A: Present worth is the present value of all future cashflows discounted at given discount rate

Q: evaluating economic progress in reducing poverty, which is the better measure – growth in income or…

A: The deduction in mortality is associated with the people living longer and have healthier life…

Q: why buying on margin is less riskier than short selling?

A: Trading on margin is a process of borrowing funds from a brokerage firm in order to execute trade…

Q: Why do conflicts sometimes arise between the netpresent value (NPV) and internal rate of return(IRR)…

A: The basic assumption between NPV and IRR method is the cash flows are reinvested. In the NPV method,…

Q: Explain the middle-income trap issue and elaborate the possible solutions to address the…

A: Traps:  There are various traps in finance and the economy, where individuals and countries can get…

Q: How will a decrease in time preferences affect the loanable funds market?   A.   There will be an…

A: Decrease in time preferences tells us that individuals in the economy are more patient and more…

Q: Which of the following statements is true for compensation of risk? a. Higher the risk, lower is the…

A: The Statement for compensation of risk is as under-

Q: You want to argue against the taxation of interest income. a) Which simple interpretation of the…

A: Atkinson–Stiglitz-: The Atkinson–Stiglitz theorem is simply a theorem of public economics which says…

Q: Which of the following statements is TRUE about risk-free investment? a. Return in risk-free…

A: Risk free investment is an investment which gives low consistent returns and is a safe, secure…

Q: According to the Capital Asset Pricing Model, higher investment risk, however it is measured,…

A: The CAPM model is being used for finding the required rates of returns of the security for given…

Q: Multiple Choice What happened? What is happening? Why did it happen? What are the root causes of…

A: The net income is the income that is received by the sale of goods and services after deducting all…

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: Anticipate TWO (2) drawbacks from the adverse selection on financial safety nets.

A: Financial Safety Nets- A financial safety net is not one savings account or an insurance guideline.…

Q: Which economic theory argues that individuals act in their self-interest, leading to an efficient…

A: The economic theory that argues individuals act in their self-interest, leading to an efficient…

Q: When performing benefit-cost analysis, economists usually discount future benefits and costs. Why?…

A: This is based on capital budgeting and concept of time value of money. Benefit-cost analysis is done…

Q: What should a company do when the cost of eliminating the conditions that create an IT risk exceeds…

A: Risk management is the process of identifying, assessing, and prioritizing risks, followed by the…

Q: When a person is not spending on current consumption or taxes, and gives up some current consumption…

A: Savings typically refers to the money that is saved or set aside by individuals, businesses, or…

Q: If a manager requires greater return when risk increases, then he is said be.......   A.…

A: Risk averse reflects the quality of an individual who do not like much of the risk in the portfolio…

Q: Do you think investors should practice dollar cost averaging when investing their money? Why or why…

A: Dollar-Cost Averaging: Dollar-Cost averaging is an investment approach that involves investing an…

Q: A realized return is the rate of return actually earned on an investment. Group of answer choices…

A: Return: Return is defined as the money attained or lost on an investment through certain time…

Q: In a margin account, the interests should be higher than the returns. TRUE OR FALSE?

A: In a margin account, the investor borrows from the broker. So, it is not necessary that the interest…

Q: Purchasing Power Parity (PPP) theory fails to explain the facts. explain whether true or false

A: Buying power parity is a method of comparing the absolute purchasing power of currencies and, to…

Q: es it govern social and

A: There is no concept exist like talent because every individual have the unique quality and they have…

Q: Which of the following is a disadvantage of the average rate of return method? a. fails to…

A: The question is asking about the disadvantages of the average rate of return method in accounting.…

Q: What are the critical differences between social cost benefit analysis (SCBA) and economic cost…

A: Social Cost Benefit Analysis : Meaning - It tend to analyse operational costs or the project costs…

Q: The DPBP is ideal as a stand-alone measure of economic worth. True or False?

A: Discounted Pay-Back Period or DPBP is period in which discounted value of future cash inflows is…

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.