ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -Which of the statements below BEST describes the relationship between risk and return when considering an investment? Investors expect to earn lower return when they invest in a risky asset like a startup company.
Detailed explanation-2: -The capital market is by nature riskier than the money market and has greater potential gains and losses.
Detailed explanation-3: -Counterparty risk, interest rate risk, and default risk are examples of risks in the financial world. Systemic risk refers to the risk that problems in one or a few companies will affect the entire sector or economy. Diversification mitigates non-systemic or unsystemic risk.
Detailed explanation-4: -The risk inherent in various financial assets is the possibility of losing money. The riskiest financial asset is equity. There are various types of risk in financial assets; it depends on the organization how they categorize these risks, like credit risk, liquidity risk, operational risk, and market risk.