The Reason for the Increase in Inflation Risk Over Time

question 122

Multiple Choice

The reason for the increase in inflation risk over time is due to the fact that:

• A) the inflation rate always increases over time.
• B) we always have inflation.
• C) it is more difficult to forecast inflation over longer periods of time.
• D) investors are more focused on nominal returns than real returns.

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Definitions:

Encumbered Assets

Assets that are used as security or collateral for a loan or debt, restricting their free use or disposal by the owner.

Secured Borrowing

A type of loan in which the borrower pledges an asset as collateral for the loan, which the lender can claim if the loan defaults.

Financial Statements

Formal records that outline the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Sale and Leaseback Arrangement

A financial transaction where one sells an asset and leases it back for the long-term; thereby retaining its use while freeing up the cash invested in the asset.