The Likelihood That a Trading Partner Will Opportunistically Break a Contract

question 35

Multiple Choice

The likelihood that a trading partner will opportunistically break a contract or expropriate property rights is called a(n)

• A) economic risk.
• B) legal risk.
• C) cultural risk.
• D) political risk.

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Definitions:

Bond's Yield

The return an investor realizes on a bond, calculated as the interest or dividends received divided by the price of the bond.

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and satisfy its shareholders and creditors.

NPV

Net Present Value - a calculation used to assess the profitability of a project or investment by summing the present values of all cash flows associated with it.

IRR

Internal rate of return. A capital budgeting technique that rates projects according to their expected return on invested funds. The higher the return the better.