Why do investors sometimes demand risk premiums when investing?
What will be an ideal response?
Answer: The typical investor is risk averse which means they don't like to take risks with their important money like retirement savings. The problem is that conservative, low risk investments typically do not provide a high enough real return to allow these risk averse investors to reach their goals. In order to motivate these investors to assume a higher level of risk, then there must be a higher potential return available. The various risk premiums increase the potential nominal returns providing motivation for investors to assume higher risks. Without these risk premiums no one would be willing to assume the risks inherent with entrepreneurial activities severely limiting access to financial capital needed for business investment.
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Another perspective on the future of cooperative strategies envisions the emergence of:
A) mergers and acquisition. B) virtual corporations. C) franchising. D) joint ventures. E) keiretsu.
A retail mix is developed to
A. understand the retail market. B. implement vertical integration. C. promote scrambled merchandising. D. implement a retail strategy. E. formulate a retail strategy.
A company with income before income taxes of $96,000, and $20,000 in interest expense, has an interest coverage ratio of
a. 5.8 times. b. 4.8 times. c. 3.8 times. d. 6.8 times.
Grace Pack has a personal account at the CIBC Bank. She receives monthly statements with supporting cancelled cheques, and notices one is forged
A note on her statement says that all errors must be reported in 30 days after receipt of the statement or the bank is not responsible. She leaves on vacation and reports the error 45 days later on her return. Does the bank have to reimburse her? A) No, because banks are not liable for forged cheques. B) No, because the limitation clause is binding C) Yes, because the limitation clause is not effective in a consumer transaction D) Yes, because the limitation period was suspended while Grace was out of the country E) Both A and B