Heavy Risk Exposure Due to Short-Term Borrowing Can Be Compensated

question 26

True/False

Heavy risk exposure due to short-term borrowing can be compensated for by carrying more illiquid assets.

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Definitions:

Variance of Returns

A statistical measure that captures the dispersion or spread of an asset's returns around its mean or average return.

Arbitrage Opportunity

The opportunity to purchase a financial instrument at a reduced cost in one marketplace and sell it at an elevated price in a different marketplace to capitalize on the discrepancy between the two prices.

Risk-Free Rate

The theoretical return on an investment with zero risk, often represented by the yield on government securities such as U.S. Treasury bills.

Expected Return

The weighted average of all possible returns for an investment, taking into account the probabilities of each outcome, and a key concept in portfolio management and capital budgeting.