All Else Held Constant,the Future Value of a Lump Sum

question 42

Multiple Choice

All else held constant,the future value of a lump sum investment will decrease if the:  

• A)amount of the lump sum investment increases.
• B)time period is increased.
• C)interest is left in the investment.
• D)interest rate increases.
• E)interest is changed to simple interest from compound interest.

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Definitions:

Risk Aversion

A preference for safer investments, avoiding risk even at the expense of lower potential returns.

Risky Securities

Financial instruments that carry a high level of risk, offering the potential for higher returns in exchange for greater likelihood of loss.

Risk Premiums

Additional returns demanded by investors for taking on higher risk, varying according to the perceived risk of the investment.

Probability Distribution

A function in statistics that enumerates all conceivable values and their associated probabilities for a random variable within a predetermined range.