Information Asymmetry Is Present When

question 69

Multiple Choice

Information asymmetry is present when:

• A) one person knows more than another.
• B) there is risk.
• C) when both parties are lacking the same information.
• D) All of these statements are true.

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Definitions:

Dollar-Weighted Return

A method of calculating an investment's return that takes into account the timing and amount of capital inflows and outflows.

Internal Rate of Return

A financial metric used to estimate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Portfolio

A group of investment vehicles comprising equities, debt instruments, natural resources, actual currency, and cash-like assets, also covering collective investments such as closed-end funds and exchange-traded funds.

Geometric Average Return

The average rate of return on an investment per year, geometrically linked to account for the compounding effect of returns over time.