The Reason for the Increase in Inflation Risk Over Time

question 102

Multiple Choice

The reason for the increase in inflation risk over time is due to the fact that:

• A) The inflation rate always increase over time
• B) We always have inflation
• C) It is more difficult to forecast inflation over longer periods of time
• D) Investors are more focused on nominal returns than real returns

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Definitions:

Market Portfolio

A theoretical bundle of investments that includes every available asset in the market, weighted by market capitalization.

TSX

Toronto Stock Exchange, the primary stock exchange in Canada.

Stock Volatilities

The degree of variation of a trading price series over time, measured by the standard deviation of logarithmic returns.