Which One of the Following Is a True Statement Regarding

question 92

Multiple Choice

Which one of the following is a true statement regarding the components of the risk factor?

• A)When choosing an investment,it is not necessary to consider the risk factor.
• B)During inflationary times,there is no risk that the financial return on an investment will not keep pace with the rate of inflation.
• C)The interest rate risk associated with corporate bonds is the result of changes in the interest rates in the economy.
• D)The risk of business failure deals with changes in the value of stocks and bonds due to changes in interest rates in the market.
• E)The prices of stocks,bonds,and other investments never fluctuate in the market.

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Definitions:

Interest Rate

The cost of borrowing money expressed as a percentage of the total amount loaned, paid by the borrower for the use of funds.

Equilibrium Interest

The interest rate at which the quantity of loanable funds demanded equals the quantity supplied, balancing savings and borrowing.

Loanable Funds

The money available for borrowing in the financial markets, influenced by interest rates and economic conditions.

Useful Life

The period during which an asset is expected to be usable for its intended purpose.