It is generally argued that when pricing equities inflation risk is __________ it is for pricing bonds.

A) not as important as
B) more important than
C) equally important as
D) more difficult than

Question

It is generally argued that when pricing equities inflation risk is __________ it is for pricing bonds.

A) not as important as
B) more important than
C) equally important as
D) more difficult than

Quizplus · Accepted Answer

It is argued that firms may increase prices with increased inflation rates,and so inflation risk is not as important in pricing equities as it is for pricing bonds.Generally,bonds pay fixed cash flows,and so the price of these assets may be more sensitive to inflation uncertainty.

It Is Generally Argued That When Pricing Equities Inflation Risk