The Statement,"If a Deal Is Too Good to Be True,it

question 78

Multiple Choice

The statement,"If a deal is too good to be true,it probably is not true" is most closely related to which principle?

• A)The low-hanging fruit principle
• B)The no-cash-on-the-table principle
• C)The cost-benefit principle
• D)The diminishing marginal returns principle

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Definitions:

Risky Investment

An investment that carries a higher probability of losing money, alongside the possibility of yielding high returns.

Risk-free Investment

An investment that is considered to have no risk of financial loss, often represented by government bonds in stable countries.

Beta

Beta is a measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates that the stock is more volatile than the market, while a beta less than 1 suggests it is less volatile.

Expected Return

The weighted average of all possible returns for a given investment, accounting for the likelihood of each outcome.