To Convince Investors to Accept Greater Volatility in the Annual

question 104

Multiple Choice

To convince investors to accept greater volatility in the annual rate of return on an investment, you must:

• A) Decrease the risk premium.
• B) Increase the risk premium.
• C) Decrease the expected rate of return.
• D) Decrease the risk-free rate of return.
• E) Increase the risk-free rate of return.

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Definitions:

Sensitization

An increased reaction to a stimulus following repeated exposures to it.

Classical Conditioning

An educational method where a connection is made between a stimulus in the environment and one that occurs naturally, resulting in a conditioned response.

Stimuli

Physical or chemical changes in the external or internal environment that evoke a response from a living organism.

Acclimation

The process of an organism adjusting to change in its environment, allowing it to survive and reproduce.