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.

Question

Quizplus · Accepted Answer

During times of inflation, the cost of goods and services increases, which can impact the financial return on an investment. Therefore, it is important to consider inflation risk when choosing investments. Option A is false as risk factor consideration is crucial while choosing investment options. Option C and D are incorrect as the interest rate risk is the result of changes in market interest rates, and the risk of business failure deals with factors specific to individual companies. Option E is also incorrect as the prices of investments fluctuate regularly in the market.

Which One of the Following Is a True Statement