Why Is Inherent Risk Often Assessed as Relatively High for Inventory

question 93

Multiple Choice

Why is inherent risk often assessed as relatively high for inventory?

• A) potential for obsolescence
• B) complex pricing
• C) multiple storage locations
• D) all of the above

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Definitions:

Beta

A measurement of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Capital Market Line

A theoretical line representing the risk versus return of the market of all investable assets, assuming risk-free borrowing and lending rates.

Security Market Line

A representation of the capital asset pricing model which shows the relationship between risk (as measured by beta) and expected return of investments.

Expected Return

The anticipated profit or loss an investment is predicted to generate, acknowledging the potential for volatility and risk.