Which of the following factors will increase the risk level of an investment?
I. a firm's decision to use a high percentage of debt financing
II. an economic situation in which consumer prices are rising at a rapid rate
III. the ability to trade the investment in a broad market rather than in a thin market
IV. unstable currency values
A) I and II only
B) I, II and IV only
C) II and IV only
D) I, III and IV only

Question

Quizplus · Accepted Answer

I, II, and IV increase the risk level of an investment. High debt financing can lead to financial instability, rapid inflation can erode investment value, and unstable currency values can introduce exchange rate risk. The ability to trade in a broad market (III) typically reduces risk by providing liquidity.

Which of the Following Factors Will Increase the Risk Level