Weighing Risks and Returns

What is the primary focus of Chapter 2 titled 'Weighing Risks and Returns'?

• Balancing financial risks and potential returns

• Understanding historical events

• Learning about biological processes

• Exploring literary themes.

Which of the following is a purpose of investment management?

• Surveying different types of risks

• Ignoring risks to maximize returns

• Avoiding all types of investments

• Focusing only on short-term gains

What is one of the goals of reducing risks in investments?

• To earn decent returns

• To eliminate all risks

• To focus solely on high-risk investments

• To avoid any form of return

What is involved in figuring out expected returns for different investments?

• Ignoring market trends

• Analyzing potential outcomes

• Investing without a plan

• Avoiding all calculations

Why is it important to determine how much you need your investment to return?

• To ensure financial goals are met

• To avoid setting any goals

• To focus only on immediate returns

• To ignore long-term planning

Which of the following statements is true about risk?

• Risk is always controllable.

• Risk is based on past experience.

• Risk is not impacted by exposure.

• Risk is always significant.

What does the statement 'Risk is in the eye of the beholder' imply?

• Risk is objective and measurable.

• Risk perception varies among individuals.

• Risk is always avoidable.

• Risk is insignificant.

What is a stop loss order?

• A type of investment strategy

• An order to buy a stock at a lower price

• An order to sell a stock when it reaches a certain price

• A method to calculate risk

How does compounding reduce risk in investing?

• By increasing the initial investment

• By reinvesting earnings to generate more earnings

• By diversifying the investment portfolio

• By reducing the investment period

What is the relationship between uncertainty and risk in investing?

• Uncertainty decreases risk

• Uncertainty has no impact on risk

• Uncertainty increases risk

• Uncertainty guarantees higher returns