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Inflation is an increase in the cost of goods and services provided. Risk is the possibility that an investment may yield different results than the results expected. “The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this greater potential return is that investors need to be compensated for taking on additional risk of lending money out” (Marshall & McManus 1966), and because the loan might not be easily sold to another borrower if need be, that is, it has low liquidity. Liquidity is the company’s ability to meet its current obligations and is shown on the statement of financial position or balance sheet (Marshall & McManus, 1996)...
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