Which of the Following Most Closely Defines the Term Risk

question 41

Multiple Choice

Which of the following most closely defines the term risk in finance?

• A) Knowing that you will lose money on an investment
• B) A decision in which the potential outcomes are known with certainty
• C) A measure of the variability of cash flows
• D) A situation in which the required return on an asset equals its expected return
• E) A measure of the magnitude of cash flows

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Definitions:

Systematic Desensitization

A behavioral technique used to help individuals overcome phobias and anxiety disorders through gradual exposure to the feared object or situation paired with relaxation exercises.

Realism

A philosophy that emphasizes the representation of the world in a truthful, objective manner, without idealization.

Continuum

A continuous sequence, range, or whole extent of items, elements, values, or conditions, where no part is fundamentally different from adjacent parts, although the extremes are quite distinct.

Reciprocal Inhibition

A psychological principle where the induction of a response incompatible with anxiety automatically leads to the reduction of anxiety.