Limited access

Upgrade to access all content for this subject

The riskier an investment agreement, the higher the payoff. Investors from commercial banks must subscribe to this philosophy. The chance for higher payoff offsets the risk because risk-taking investors from commercial banks will only invest in opportunities that are likely to yield high rewards.

This philosophy is fundamental in creating new return offers, and it is BEST explained by the fact that


investment in well-established companies usually returns lower rates than investment in newer start-up companies.


companies can offer investors new shares at equal cost at any time.


payoffs to investors from commercial banks are often considered a guaranteed benefit.


investors receiving high pay-offs from large investments often have unlimited funds to generate such success.


commercial banks generate higher-interest payments from unsecured, collateral-free loans.

Select an assignment template