10:Pretest 10: Financial Markets

11.

What is speculation?

A. a low-risk investment with borrowed money in hope of small returns

B. a high-risk investment with borrowed money in hope of big returns

C. diversifying purchases of stock

D. an investment of large amounts of money in mutual funds

a high-risk investment with borrowed money in hope of big returns

Speculation is a high risk investment with borrowed money in hope of big returns.

Option: B

Explanation:

In financial market speculation means small investment with the the hope of big returns. Active market traders used to do it. speculative trades has a significantly high impact in financial markets. Speculative trades are trades that involve companies that have a high risk profile.

Mainly start up companies used to follow speculation in their trade services. Because they do not have huge capital in the initial stage so they take risk and invest money in the hope of profitable return.