Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to: Multiple Choice inflation risk. O interest rate risk. O income risk. personal risk.
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![Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This
problem refers to:
Multiple Choice
inflation risk.
O
interest rate risk.
O
income risk.
personal risk.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb28f8677-78a9-4914-9100-1d5f04cace4c%2Faedb6ccc-8072-4ffe-b58a-fb851084bb1a%2F3ya0gl_processed.jpeg&w=3840&q=75)
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- A borrower who takes out a loan usually has better information about the potential returns and risks of the investment projects he plans to undertake than the lender does. This inequality of information is called O a. adverse selection. b. moral hazard. C. asymmetric information. O d. noncollateralized risk.Investors require a _____ return as compensation for taking ____ risk. A) higher, margin B) higher, more C) higher, convexity D) lower, margin E) lower, more F) lower, convexityExplain the concept of risk - return trade-off in investing. How do investors balance risk and return. when making investment decisions?
- Regarding risk levels, financial managers should: A. evaluate investor's desire for risk. B. avoid higher risk projects because they destroy value. C. pursue higher risk projects because they increase value. D. focus primarily on market fluctuations. Note: Provide short answer for this account questionaccounting answer needThe risk-adjusted discount rate reduces investment. True or false?
- Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions. a. the inclusion of opportunity costs b. erosion c. errors in projected cash flows d. the exclusion of sunk costs e. net working capital costsHedging is a risk management strategy that is used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a transfer of risk without buying insurance policies. REQUIRED: Discuss the importance of hedging to the financial risk manager Are there any downside to hedging?Give a definition of a "return". Why do we need to incorporate risk into return (discount rate)?
- No risk, no reward. Most people intuitively understand that they have to bear some risk to achieve an acceptable return on their investment portfolios. But how much risk is right for you? If your investments turn sour, you may put at jeopardy your ability to retire, to pay for your kid's college education, or to weather an unexpected need for cash. These worst-case scenarios focus our attention on how to manage our exposure to uncertainty. Assessing and quantifying-risk aversion is, to put it mildly, difficult. It requires confronting at least these two big questions. First, how much investment risk can you afford to take? If you have steady high-paying job, for example, you have greater ability to withstand investment losses. Conversely, if you are close to retirement, you have less ability to adjust your lifestyle in response to bad investment outcomes. Second, you need to think about your personality and decide how much risk you can tolerate. At what point will you be unable to…Based on your understanding of the fAactors that affect the cost of money, Identify which of the following statement is true. a. higher inflation leads to lower interest rates. b. Interest is the price paid to borrow funds. c. Higher risk leads to lower interest rates.What does risk tolerance measure in the context of investment strategy? This is a multiple choice question. Once you have selected an option, select the submit button below The ability to take on higher risks for potentially higher returns The willingness to accept losses in the short term The capacity to afford potential losses The preference for low-risk, low-return investments
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