Question

QUESTION 3

Which of the following influences one's risk tolerance?

1. Personality.

2. Upbringing.

3. Type of future cash flows for the household.

4. All of the above.

5. None of the above.

QUESTION 4

Which of the following is not a use of home ownership?

1. Providing shelter.

2. Short-term investment.

3. Providing pleasure to its occupants.

4. All of the above are uses of home ownership.

5. Both b and c are not uses of home ownership.

  

QUESTION 5

What are capital expenditures?

1. Outlays for financial assets.

2. Outlays that provide benefits over an extended period of time.

3. Outlays thata can be used for purchasing new assets but not improving existing one

4. .Both a and b.

5. Both b and c.

QUESTION 10

Using cash as much as possible is a method through which one can:

Reduce temptation.

Minimize discomfort.

Eliminate options to spend.

All of the above.

None of the above

Answer 1

3: all of the above

Risk tolerance is defined by both the personality and the upbringing of the individual. Some people have been brought up in an environment where they have seen others take a lot of risk and this increases their risk tolerance. Also the type of future cash flows define the risk tolerance. This is because if the future cash flows are certain and stable a person has the capacity to tolerate a higher amount of risk and vice versa.

4: short-term investment

Investing in a house is a long-term investment. It also provides shelter and pleasure to the investors.

5: Outlays that provide benefits over an extended period of time.

Capital expenditures are expenses such as investment in plant and machinery or a building which provides benefits over a long period of time. It does not refer to expenses for financial assets. Such expenditures may be in the form of purchase of a new asset or investment in improvement of the existing capital assets.

10: minimize discomfort

The use of cash minimizes time and effort for making the payments. It is easy quick and convenient. It does not reduce temptation or eliminate options, rather it increases temptation and options.