Which of the Following Financial Instruments Entails the Most Risk

question 23

Multiple Choice

Which of the following financial instruments entails the most risk and potentially the highest returns for investors?

• A)Debt with a maturity of less than one year
• B)Bonds
• C)Ordinary shares
• D)Preference shares

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Definitions:

Cash Flow Growth Rate

This rate indicates the year-over-year percentage increase or decrease in a company's cash flow, used to assess the firm’s financial health and operational efficiency.

Future Value

The value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Cash Flows

The total flow of cash and cash-like assets entering and leaving a company.