The Reward-Risk Ratio Theory Has Gained Credence Because of Evidence

question 118

Multiple Choice

The reward-risk ratio theory has gained credence because of evidence that when carry trade profit margins are high, arbitrage bids them down quickly, whereas when they are low:

• A) investors pursue them more slowly.
• B) investors are often not interested.
• C) arbitrage bids them up quickly.
• D) no arbitrage is possible.

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Definitions:

Risk-taking Individual

A person who is willing to undertake activities that involve risk in order to achieve goals, often in the context of business or entrepreneurship.

Tolerance for Ambiguity

An individual's capacity to remain comfortable and function effectively in situations that are uncertain, unclear, or unpredictable.

Corporate Career Backgrounds

Histories or experiences of individuals in business environments, detailing progression, roles, and achievements within corporate structures.

Corporate Bureaucracies

Refers to complex organizational structures that involve many levels of management, rules, and regulations, often leading to inefficiency.