Inflation,recession,and High Interest Rates Are Economic Events That Are Best

question 119

Multiple Choice

Inflation,recession,and high interest rates are economic events that are best characterized as being

• A) systematic risk factors that can be diversified away.
• B) company-specific risk factors that can be diversified away.
• C) among the factors that are responsible for market risk.
• D) risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers.
• E) irrelevant except to governmental authorities like the Federal Reserve.

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Definitions:

Interest

The cost of borrowing money, often expressed as a percentage rate over a period of time, or the income earned from lending money.

Dividends

Money disbursed by a business to its members, principally originating from the enterprise's earnings.

Financial Intermediary

An institution that pools investors’ money and invests it on their behalf giving the investors shares of itself. Mutual funds are the primary example.

Indirect Method

A way of calculating cash flows from operations by starting with net income and adjusting for changes in non-cash accounts.