What are speculative risk and pure risk?
What will be an ideal response?
Answer: Speculative risk involves a chance of either gain or loss. Pure risk involves a chance for either loss or no loss; there is no possibility of gain.
Explanation: Speculative risk is the kind of risk that a company takes when it introduces a new product, which may make the firm a profit or may lose money. An example of a pure risk is constructing a building for your company—you are risking its loss from fire, flood, or whatever, but there is no way you can gain from these disasters.
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Roberts Construction Group paid $6,000 for a plant asset that had a market value of $10,500. At which of the following amounts should the plant asset be recorded?
A) $10,500 B) $3,000 C) $6,000 D) $12,000
Why is a volatility trading strategy considered to be a non-directional strategy?
What will be an ideal response?