How could you compensate an investor for taking on a significant amount of risk?
A) Increase the expected rate of return
B) Raise more debt capital
C) Offer stock at a higher price
D) Increase sales

Question

Quizplus · Accepted Answer

Increasing the expected rate of return is the best choice for compensating an investor for taking on a significant amount of risk. This is because investors expect to be compensated for taking on more risk than usual. By increasing the expected rate of return, the investor would be more willing to take on the risk involved in the investment. Raising more debt capital, offering stock at a higher price, and increasing sales could all be used to increase the overall value of the investment, but they do not specifically compensate the investor for taking on additional risk.

How Could You Compensate an Investor for Taking on a Significant