The Rate of Return of Certain Investments Increases as the Risk

question 88

Multiple Choice

The rate of return of certain investments increases as the risk factor of the investment increases. An investment with a risk factor of 2 has a rate of return of 5.0%. An investment with a risk factor of 24 has a rate of return of
12) 0%. What is the average rate of return per unit of risk?

• A) 3.14% per unit risk
• B) 1.90% per unit risk
• C) 0.53% per unit risk
• D) 0.32% per unit risk

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Definitions:

Inventory Turnover

A measure of how frequently a company sells and replaces its stock of goods during a period, indicating the efficiency of inventory management.

Asset Management

An orderly process for building, running, maintaining, and disposing of assets in a way that minimizes expenses.

Profitability

A measure of the efficiency of a company in generating profits from its operations, often expressed as a percentage of revenues.

Debt

Money owed by one party to another under the condition that it will be repaid, often with interest, at a future date.