Reference no: EM131332741
Which one of the following is a true statement?
A. When choosing an investment, it is not necessary to consider the risk factor.
B. During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation.
C. The interest rate risk associated with investments in bonds is the result of changes in business conditions faced by companies.
D. The risk of business failure deals with changes in the value of stocks and bonds due to changes in interest rates in the market.
E. The prices of stocks, bonds, and other investments never fluctuate in the market.
2. Which of the following can cause a bond investor to lose money?
A. Selling a bond prior to maturity and at a time when the market interest rate exceeds the bond's interest rate
B. Converting a bond into shares of common stock that have a lesser combined value and immediately selling those shares
C. By the issuer going out of business when there are insufficient assets to pay the bondholders
D. By the issuer defaulting
E. All of these circumstances can cause a bond investor to lose money.
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