A Decision or Choice That Is Made After Optimization Analysis

question 23

Multiple Choice

A decision or choice that is made after optimization analysis ________.

• A) has zero opportunity cost
• B) is not necessarily risk free
• C) is the same for all individuals
• D) cannot be justified using normative analysis

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Definitions:

Bond Rating

An evaluation provided by a credit rating agency regarding the creditworthiness of a bond issuer, affecting the interest rates and investment appeal of its bonds.

Secured Debt

A debt that is backed by collateral, providing the lender with assurance that the loan can be recovered if defaulted.

Unsecured Debt

A type of debt that is not backed by collateral, making it riskier for lenders and often resulting in higher interest rates for borrowers.

Reinvestment Rate Risk

The risk that the yield from reinvesting cash flows will be lower than the initial investment's yield, typical in fixed-income securities.