1. What does finance primarily study when monetary resources are scarce and decisions unfold over time?
2. Which situation best illustrates risk rather than uncertainty?
3. Why does diversification reduce an investor’s exposure to a single investment?
What does Finance study regarding monetary resources?
How individuals, businesses, and organizations raise, allocate, and use scarce monetary resources over time.
What distinguishes risk from uncertainty?
Risk involves uncertain outcomes that can be assessed, unlike uncertainty.
What does uncertainty describe in outcomes?
Outcomes that are not reliably predictable.
How does diversification reduce exposure?
By avoiding concentration in a single investment.
What rule summarizes the principle of diversification?
Never put all your eggs in one basket.
What are the key steps in financial decision making?
Assessing expected returns, evaluating investment opportunities, analyzing risk, and allocating assets.
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