In Theory,the Decision Maker Should View Market Risk as Being

question 45

Multiple Choice

In theory,the decision maker should view market risk as being of primary importance.However,within-firm,or corporate,risk is relevant to a firm's

• A) Well-diversified stockholders,because it may affect debt capacity and operating income.
• B) Management,because it affects job stability.
• C) Creditors,because it affects the firm's credit worthiness.
• D) All of the above are correct.
• E) Only answers a and c are correct.

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Definitions:

Liquidity

Money or things that can be quickly and easily converted into money with little or no loss of value.

Profits

The financial gain that is achieved when the amount of revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the principle.

U.S. Government Securities

Financial instruments issued by the United States Department of the Treasury to finance federal government spending, including Treasury bills, notes, and bonds.