Which of the Following Statements Is True with Regard to the Risk

question 90

Multiple Choice

Which of the following statements is true with regard to the risk of investments?

• A) There is very little risk in an IPO since returns often exceed 20% in the first day.
• B) Mutual funds containing mostly large stocks are more risky than mutual funds containing smaller stocks.
• C) If you prefer less risk, purchase a bond issued by a successful and established firm.
• D) There is little risk in purchasing land as an investment since the value of land always appreciates over time.

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Definitions:

Bargain Purchase Option

An option given to the lessee to purchase the leased asset at the end of the lease term at a price significantly lower than the expected fair market value.

Future Rents

Future rents refer to the payments that are expected to be received in the future for the use of an asset, typically real estate.

Unreimbursable Costs

Expenses that cannot be recovered or compensated for by any means.

Estimated Economic Life

The expected period over which an asset is considered to be useful and contribute to the earnings of a business, affecting its depreciation or amortization.