What are the three common features of all investments and why are they important?
What will be an ideal response?
First, all investments require that investors pay some sort of price determined by the market to obtain the asset. Second, all investments provide owners with the opportunity to earn future income. Lastly, all future incomes are usually risky.
These features are important because they allow investors to treat investments in a standard way. The combination of the three features allows investors to determine which investments best fit each investor’s preferred level of risk and return.
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If a monopolist can perfectly price discriminate, it will
A) charge the same price for each unit sold. B) produce until price elasticity of demand equals one. C) not be concerned with the market demand. D) charge a different price for every unit sold.
Economic theory predicted that the price of a depletable resource would rise by 10 percent. In reality, the price fell by 5 percent. Which of the following events could explain this discrepancy?
A. Known reserves of the resource were depleted. B. The interest rate rose by 15 percent. C. Antitrust enforcement broke up a cartel among major suppliers of the resource. D. The government imposed an effective price floor.
Which of the following is not an assumption of the Cournot model presented in the text?
A. Both firms maximize profits. B. If the first firm cuts price, the second firm will follow and if the first raises price, the second will not follow. C. There are two firms in an industry. D. Each firm takes the output of the other firm as given.
Trade sanctions were effective in removing Iraq from Kuwait after its 1990 invasion.
Answer the following statement true (T) or false (F)