Question

In: Finance

Question 5 Stocks are a way to raise capital through selling ownership or equity. Question 5...

Question 5 Stocks are a way to raise capital through selling ownership or equity. Question 5 options: True False

Question 6 You are risk averse if you just want to make a quick profit in the markets through your investments. Question 6 options: True False

Question 7 The lower the risk, the greater the potential return and the greater the potential losses and opportunity costs. Question 7 options: True False

Question 8 Stocks create return through the distribution of corporate profits as dividends or through gains (losses) in corporate value. Question 8 options: True False

Solutions

Expert Solution

Question 5 :

The statement is TRUE. Stocks are a way to raise capital by selling ownership or equity.

Stockholders are the last to make a claim over the assets and income of the company. Debt is also a way of raising capital without selling ownership or equity in the company.

Question 6 :

This is a FALSE statement. An investor is risk averse when he does not wish to take too much risk in his investments in the markets. With lower risk, the return earned is also lower.

So, if an investor is risk averse, he might not make a quick return through his investments, is the statement is FALSE.

Question 7 :

With greater risk, the opportunity to earn a higher return increases. With low risk, we can low return and with high risk we can get higher returns.

low risk ,lower is the potential for returns and lower will be the losses.

So, the statement is FALSE.

Question 8 :

This is a TRUE statement.

The return earned through a stock is the distribution of dividends and the gains/losses in the value of the stocks,

Capital gains is earned when the stock value increases and losses are incurred when the value of the stock declines.


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