What do we mean by risk? In long-term investments, equities tend to give higher returns than bonds.

Question:

What do we mean by risk? In long-term investments, equities tend to give higher returns than bonds. Why then, do all investors not invest in equities? Are such investors irrational?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

See More Books

Question Posted: Feb 22, 2024 03:01 AM

See More Questions

In the context of the text, what should the future look like? What does Yanis Varoufakis's utopia look like? How does he suggest we achieve this? What happens if we fail? View keyboard shortcuts...
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
An asset with a first cost of $9000 is depreciated by MACRS over a 5-year recovery period. The CFBT is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is...
If innovation is inherently unknowable, and creates unintended consequences, often far downstream, how can managers effectively evaluate the outcomes of innovation initiatives? Is there ever a point...
The CDC 6600 computers could handle up to 10 I/O processes simultaneously using an interesting form of round-robin scheduling called processor sharing. A process switch occurred after each...
The following questions refer to Example 7.9 and Section 7.7.8. a. Evaluate the parallelism assumption in mod_ancova. What do you conclude? b. Compute the adjusted difference in mean weight gain...
Consider the drug treatment system shown in the figure below. A hemispherical cluster of unhealthy cells is surrounded by a larger hemisphere of stagnant dead tissue (species B), which is turn...
Visit one B2C and one B2B Web site. Examine each carefully, identifying as many relationship building techniques as possible. Do you find extensive differences between the B2C and B2B sites? Discuss...
Given that the Venezuela Caracas Stock Exchange was up by over 80 per cent for 2011, why didnt all investors put their money in Venezuela?
Why would you wish to present return distributions? How do you think the distributions would change when you incorporated inflation into the return statistics?
Assume you just deposited $1,250 into a bank account. The current real interest rate is 1%, and the expected rate of inflation over the next year is 5%. What nominal interest rate should the bank...
Set up a one-period binomial tree for a put option. Use the following information about the underlying stock price and the risk-free interest rate. What is the current value of the hedge portfolio?...
Provide an appropriate answer to the following questions: a.What are three types of financial management decisions? b.What is the goal of financial managers? Please explain in your own words....
Consider the two financing alternatives below for an $1,300,000 house purchase. Both loans are fully amortizing fixed rate mortgage with monthly payments. Alternative 1: Alternative 2: LTV = 90% LTV...
The initial cost of a project is $40,000. The operating costs of this investment in year 1 is $3,000 which increases by 2% each year thereafter. Given the interest rate, 8%, determine the year in...
Sarah and Albert each invested $10,000 in an index-linked principal-protected (PPN) note on the same underlying index. Sarah' PPN had 75% participation rate. Albert's note had a 50% performance cap....
Explain where to find the information needed to determine a companys cash flow adequacy.
A copper rod of length L =18.0 in is to be twisted by torques T (see figure) until the angle of rotation between the ends of the rod is 3.08. (a) If the allowable shear strain in the copper is 0.0006...
The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment costs $10 million and the company expects to sell its old equipment for $1...
Rustic Welt could commission engineering tests to determine the actual improvement in manufacturing costs generated by the proposed new welt machines. (See problem 4 above.) The study would cost...
Summarize the problems that a manager would encounter in interpreting a standard sensitivity analysis, such as the one shown in Table 10.2. Which of these problems are alleviated by examining the...
Suppose a spectral line of hydrogen, normally at 5 0 0 nm , is observed in the spectrum of a star to be 5 0 0 . 1 nm . How fast is the star moving toward or away from Earth?
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50...
5. (a) In the ENGR 10 lab (E391), there are 60 long light bulbs (P=110 W) and 35 regular bulbs (P=68 W). How much energy is consumed lighting the lab during the 3 hour lab period. Calculate the...

What do we mean by risk? In long-term investments, equities tend to give higher returns than bonds.

Question:

Step by Step Answer:

In finance risk refers to the uncertainty or variability of returns associated with an investment It encompasses the possibility of losing part or all of the invested capital and is a key consideratio...View the full answer

Corporate Finance

Students also viewed these Business questions