BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1.riskless assets
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2.risky assets
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3.return assets
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4.none of the above
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Detailed explanation-1: -A risk-free asset is one that has a certain future return-and virtually no possibility they will drop in value or become worthless altogether. Risk-free assets tend to have low rates of return, since their safety means investors don’t need to be compensated for taking a chance.
Detailed explanation-2: -Risk asset may also refer to equity capital in a financially stretched company, as its shareholders’ claims would rank below those of the firm’s bondholders’ and other lenders.
Detailed explanation-3: -The simplest way to examine this is to consider a portfolio consisting of 2 assets: a risk-free asset that has a low rate of return but no risk, and a risky asset that has a higher expected return for a higher risk.
Detailed explanation-4: -Risk assets are any assets that are not risk-free – they carry an element of risk. The term generally refers to any financial security or instrument, such as equities, commodities, high-yield bonds, and other financial products that are likely to fluctuate in price.