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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- 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 questionThe 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 costs
- Give a definition of a "return". Why do we need to incorporate risk into return (discount rate)?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
- Give typing answer with explanation and conclusion The additional compensation that investors require to take on higher risk investments is the a. standard deviation. b. coefficient variation. c. Sharpe ratio. d. risk premium. e. risk aversion.Which of the following is TRUE? High-risk investments always have high returns If you invest in a risky investment, you are guaranteed to have a high return. On average, an investor will earn high returns on a low-risk investment On average across investments and over time, riskier investments have higher returns. A high-risk investment will never have a total loss.An investment requires a total return that comprises: O a real rate of return and compensation for inflation. a real rate of return, compensation for inflation, and a risk premium. compensation for inflation and a risk premium. a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. None of the above