2. Cost of money Aa Aa Four fundamental factors affect the cost of money: the return that borrowers expect to earn on their investments, (2) the preference of savers to spend their income the current period rather than delay their in consumption until some future period, (3) the risks associated with the investment, and (4) expected inflation. Consider the following statements that address these factors, and indicate which you think are false. statement 1: All else being equal, the more highly that savers and investors prefer immediate spending to deferred consumption, the lower the compensation that savers and investor will require to induce them to make an investment that will necessitate postponed spending. Statement 2: On average and everything else held constant, an investment that can provide a should attract more investment capital from saversinvestors than an otherwise identical investment that can generate a 12% return. Statement 3: Projects z10 and A20 are otherwise identical investments except for one important The cash flows expected from Project A20 are as likely to be realized as those expected from Project z10. This means that Project z10 is more risky than Project A20. Statement 4: For the average rational investor or saver, there is an indirect, or inverse, relationship between the amount of risk exhibited by a security and the risk premium that would be required by the investor or saver. The false statements are: 1 and 2 2 and 4 O 1, 2, and 4 3 and 4. 2. Cost of money Aa Aa Four fundamental factors affect the cost of money: the return that borrowers expect to earn on their investments, (2) the preference of savers to spend their income the current period rather than delay their in consumption until some future period, (3) the risks associated with the investment, and (4) expected inflation. Consider the following statements that address these factors, and indicate which you think are false. statement 1: All else being equal, the more highly that savers and investors prefer immediate spending to deferred consumption, the lower the compensation that savers and investor will require to induce them to make an investment that will necessitate postponed spending. Statement 2: On average and everything else held constant, an investment that can provide a should attract more investment capital from saversinvestors than an otherwise identical investment that can generate a 12% return. Statement 3: Projects z10 and A20 are otherwise identical investments except for one important The cash flows expected from Project A20 are as likely to be realized as those expected from Project z10. This means that Project z10 is more risky than Project A20. Statement 4: For the average rational investor or saver, there is an indirect, or inverse, relationship between the amount of risk exhibited by a security and the risk premium that would be required by the investor or saver. The false statements are: 1 and 2 2 and 4 O 1, 2, and 4 3 and 4