BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an expected return for delaying consumption.
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an expected return for opportunity costs.
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an expected return for taxes.
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irrational investors who believe risk is always present.
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Detailed explanation-1: -The risk/return tradeoff implies that the return on a riskless asset must be zero. open above $20 because the positive news will result in a higher valuation even though the stock has not yet traded. Joe, a risk-averse investor, is trying to choose between investment A and investment B.
Detailed explanation-2: -In the financial world, risk refers to the chance that an investment’s actual return will differ from what is expected-the possibility that an investment won’t do as well as you’d like, or that you’ll end up losing money.
Detailed explanation-3: -First is the principle that risk and return are directly related. The greater the risk that an investment may lose money, the greater its potential for providing a substantial return. By the same token, the smaller the risk an investment poses, the smaller the potential return it will provide.