31. Read the arguments given below and answer the questions that follow.
Which of the given choices best completes the following passage?
The more worried investors are about losing their money; the more they will demand a high potential return on their investment, great risks must be offset by the chance of great rewards.
This principle is the fundamental one in determining interest rates, and it is illustrated by the fact that

Successful investors are distinguished by an ability to make very risky investments without worrying about their money.

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Lenders receive higher interest rates on unsecured loans than backed by collateral.

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

In times of high inflation, the interest paid to depositors by banks can actually be below the rate of inflation.

No worries! We‘ve got your back. Try BYJU‘S free classes today!

At any one time, a commercial bank will have a single rate of interest that it will expect all of its individual borrowers to pay.

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is B Lenders receive higher interest rates on unsecured loans than backed by collateral.
Since an unsecured loan is more risky, from the lender’s point of view, than a loan backed by collateral, the fact that lenders receive higher interest rates for unsecured loans is an illustration of the principle outlined in the passage. Thus (b) is the best answer.
None of the other choices gives a clear instance in which increased risk is compensated by the potential for increased return. (a) does not concern to return on investment at all. (c) is an instance of low return unrelated to risk. In (d), contrary to the principle, the rate of return remains constant despite possible variations in risk.

Suggest Corrections

Similar questions

Q. A passage is given below followed by several inference . You have to examine each interference separately in the context of the passage and decide upon its degree of truth or falsity , Mark your answer as:
Investors today have more investment options than were available just a few years ago. Choice in any decision-making is good in so far it provides variety, differentiation and bench-marking. It could also, however, at times lead to clutter and "noise" if the options are mostly similar and undifferentiated. To make sense of this choice conundrum, it is imperative for an investor to define objective - both returns and digestible risk and then identify the possible options. The investor also needs to select the mix and regularly monitor that objectives and investment outcomes remain aligned. Sounds simple, but can present the most confounding situation which multiplies with the quantum of wealth.
Present day investors need to use their judgement more critically before investing.

Q. Read the following passage carefully and answer the questions given below it. Certain words/phrases have been printed in bold to help you locate them while answering some of the questions.
Which of the following is not true in the context of the passage?
A.Despite being aware of the fact that clients will not return, fruit and vegetable vendors sell bad goods.
B. Examiners are devoted to their jobs.
C. Examiners deliberately mark correct answers as incorrect ones.

Q. A passage is given below followed by several inference . You have to examine each interference separately in the context of the passage and decide upon its degree of truth or falsity , Mark your answer as:
Investors today have more investment options than were available just a few years ago. Choice in any decision-making is good in so far it provides variety, differentiation and bench-marking. It could also, however, at times lead to clutter and "noise" if the options are mostly similar and undifferentiated. To make sense of this choice conundrum, it is imperative for an investor to define objective - both returns and digestible risk and then identify the possible options. The investor also needs to select the mix and regularly monitor that objectives and investment outcomes remain aligned. Sounds simple, but can present the most confounding situation which multiplies with the quantum of wealth.

Investors need to critically evaluate the risk of each investment option.

Q. Read the following passage and answer the questions given below it. Certain words/phrases are given ...
In a disarmingly frank talk at the Indian Merchants Chamber in Mumbai, the Japanese Ambassador in India dwelt at length on issues that exercise the minds of Japanese investors when they consider investment proposals in India. Raising the question “What comparative advantages does India offer as an investment market?”, he said though labour in India is expensive, wage-levels are offset by productivity level to a large extent. Acknowledging that the vastness of the Indian market is a great inducement for investment in manufacturing industry, he wondered if it was justifiable to provide that overseas remittance of profit in foreign exchange to fully covered by exchange earnings as had been done. Significantly, on the eve of the Prime Minister’s visit to Japan, the government delinked profits repatriation from exports, meeting this demand.
The Ambassador said foreign investors needed to be assured of the continuity and consistency of the liberalisation policy and the fact that new measures had been put into force by means of administrative notifications without amending government laws acted as a damper. The Ambassador pleaded for speedy formulation of the exit policy and pointed to the highly restrictive control by the government on disinvestment by foreign partner in joint ventures in India. While it is all too easy to dismiss critical comment on conditions in India contemptuously, there can be little doubt that if foreign investment is to be wooed assiduously, we will have to meet exacting international standards and cater at least partially to what we may consider the idiosyncrasies of our foreign collaborators. The Japanese too have passed through a stage in the fifties when their products were derided as sub-standard and shoddy. That they have come out of that ordeal of fire to emerge as an economic superpower speaks a much of their doggedness to pursue goals against all odds acceptable standards. There is no gainsaying that the paste record of Japanese investment is a poor benchmark for future expectations.
Q. For seeking more and more foreign investment, the author suggests that we should

Q. Read the following passage carefully and answer the questions given below it. Certain words have been printed in bold to help you locate them while answering some of the questions.
Which of the following cannot be said about small businesses?
A. During the recession, their profits have been higher than those made by big corporates.
B. They adopt fair labour practices and environment-friendly methods of production.
C. They have managed to acquire an investment of over 11% of American capital.

Join BYJU'S Learning Program