The ____ Ratio Is Based on the Principle That a High-Risk

question 168

Multiple Choice

The ____ ratio is based on the principle that a high-risk investment should generate higher financial returns for a business and more conservative decisions often generate lesser returns.

• A) return on owners' equity
• B) risk-return
• C) earnings
• D) investment-to-equity
• E) quick return

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Definitions:

Counterparty

The other organization or party involved in a financial transaction.

Interest Rate Differential

The difference in interest rates between two distinct economic or financial entities, typically affecting currency value or investment decisions.

Forward Exchange Rates

Exchange rates at which two parties agree to exchange currencies at a future date.

Interest Rate Parity

A theory which states that the difference in interest rates between two countries is equal to the difference between the forward exchange rate and the spot exchange rate.