Which of the Following Factors Will Increase the Risk Level

question 118

Multiple Choice

Which of the following factors will increase the risk level of an investment?
I. a firm's decision to use a high percentage of debt financing
II. an economic situation in which consumer prices are rising at a rapid rate
III. the ability to trade the investment in a broad market rather than in a thin market
IV. unstable currency values

• A) I and II only
• B) I, II and IV only
• C) II and IV only
• D) I, III and IV only

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Definitions:

Festinger

Refers to Leon Festinger, a psychologist best known for his cognitive dissonance theory, which explores the discomfort felt by individuals when their beliefs or behaviors are inconsistent.

Cognitive Consistency

A psychological theory suggesting that individuals are motivated to maintain consistency among their cognitions, leading to changes in attitudes, beliefs, or behaviors when inconsistencies occur.

Festinger and Carlsmith's Experiment

A psychological study on cognitive dissonance which demonstrated how attitude change can result from forced compliance behavior.

Enjoyable

Experiences or activities that provide pleasure, satisfaction, or joy, making them desirable to engage in.