What Do Pyramid and Ponzi Schemes Have in Common

question 34

Multiple Choice

What do pyramid and Ponzi schemes have in common?

• A) Investors must recruit other people to participate in order to make money.
• B) People who organize the schemes rarely communicate with investors.
• C) Investors receive information on investment strategies which builds trust in the schemes.
• D) Payments made to investors come from new participants in the schemes.

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Definitions:

Systematic Risk Factors

Factors that affect the overall financial market and cannot be mitigated through diversification. These include interest rates, inflation, and economic recessions.

Economic Events

Economic events are occurrences with economic impact that affect an entity's financial position and performance, including transactions and market fluctuations.

Market Risk

The likelihood that investors might face losses because of issues impacting the general functioning of the financial markets.

Standard Deviation

A statistical measure of the dispersion or spread of a set of data points in relation to their mean, used to gauge volatility.