Question

Four fundamental factors affect the cost of money:

Answer 1

Answer:

True statement is:

All thing being equal, savers and investors prefer more risk to less risk and prefer lower risk premiums on projects exhibiting higher levels of risk.

Explanation:

Investors wish to receive less risk and more return. They prefer from more risk to lesser risk and receive risk premium on project that exhibit higher level of risk and delayed compensation. A project with 12% return will be more riskier than a project with 8% return. Rate of return increases as the level of risk increases.