An Organization Invests Its Savings in a Volatile Stock with the Potential

question 263

Multiple Choice

An organization invests its savings in a volatile stock with the potential for high gains rather than a mutual fund with a lower expected return and lower volatility. This best describes which of the following risk concepts?

• A) Risk identification.
• B) Risk appetite.
• C) Risk capacity.
• D) Risk tolerance.

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Definitions:

Indifference Curves

Graphical representations in economics showing different combinations of goods that give a consumer equal satisfaction and utility.

Affordable

Describes something that is reasonably priced, or within one's financial means.

Income Earns

The compensation received by an individual or generated by an entity in exchange for labor or services or as earnings from investments.

Afford

The financial capacity to purchase something, indicating that the cost does not exceed the buyer’s purchasing power or budget constraints.