4th quarter Business Finance Summative Test

What is risk in investment?

• Chance of exceeding expected return

• Possibility of losing original investment

• Certainty of profit

• Fixed return on investment

Which risk is associated with changes in demand and supply?

• Market risk

• Financial risk

• Management risk

• Purchasing power risk

What is financial risk associated with?

• Capital structure of a firm

• Uncertainty in future market values

• Fluctuations in interest rates

• Management decisions

What is liquidity risk associated with?

• Uncertainty in future market values

• Inability to meet financial obligations

• Inability to sell quickly for cash

• Erosion of purchasing power

What type of investors accept higher levels of risks for equal expected returns?

• Risk-neutral investors

• Risk-taker investors

• Risk-averse investors

• All of the above

Who select a portfolio that maximizes expected returns for any given level risk or minimizes risk for any given level of expected return?

• Risk-neutral investors

• Risk-taker investors

• Risk-averse investors

• All of the above

The following factors are non-systematic risk except:

• Default risk

• Financial risk

• Liquidity risk

• Purchasing power risk

It is used as a measure of the amount of absolute risk associated with an outcome and provides more information about the risk of the asset.

• Alpha

• Standard Deviation

• Range

• Beta

You are considering purchasing a new car that is beyond your budget. Which personal finance philosophy should guide your decision-making process?

• "Live below your means."

• "More things will not make you happy."

• "Be pound wise."

• "Automate everything."

Personal financing process that may involve other entities in dealing with the execution of the recommended financial plan.

• Objective setting

• Data gathering

• Plan monitoring

• Plan Implementation