Suppose you are a financial consultant and following 3 clients have approached to you seeking advise on the investment to be made in securities. All…

CA Final · Advanced Financial Management · MTP · May 2024
Suppose you are a financial consultant and following 3 clients have approached to you seeking advise on the investment to be made in securities. All these clients have different background and risk appetite as well as perception to the market. Client A wants to invest in Fixed income avenues and therefore he is looking at the credit rating of the securities as well as financial ratios such as interest coverage, earning power etc and the general prospect of the industry.Client B wants to earn a fixed income over a period of time by holding the security till its maturity.Client C wants to earn more by taking more risk. Therefore, he is more interested to invest in stocks. He believes that Price reflects all information found in the record of past prices and volumes. On the basis of above information, choose the most appropriate answer to the MCQs.
(A) Yield to maturity
(B) Risk of Default
(C) Tax Shield
(D) Liquidity

Suggested Answer and Working Notes:

Correct Answer: Option (B)

Risk of Default

Topics: Security Valuation

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