If Left to Decide the Level of Risk on Their

question 67

Multiple Choice

If left to decide the level of risk on their own, banks or other intermediaries will generally accept _______ risk, because they fail to consider the additional costs of failure that the community at large must bear.

• A)too much
• B)too little
• C)the appropriate amount of
• D)none of these answers are correct

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Definitions:

Break-Even Time

Break-Even Time refers to the period required for a business to generate enough revenue to cover its total initial investment costs, effectively reaching a financial state where no loss or gain is realized.

Payback Period

The time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.

Net Present Value

Net present value is a financial metric that calculates the present value of all cash flows associated with a project, including both inflows and outflows, to determine its profitability.

Time Value of Money

The notion that money’s worth is greater in the present than an equivalent sum in the future, attributed to its earning potential.