Question

John Gleason is interested in purchasing a 46" rear projection TV for his living room. John knows that right now the TV will cost approximately $1500. John is not sure he can afford this TV right now but is worried that if he waits, the cost of the TV will rise to $1800. What type of risk is John worried about?

Answer 1

The correct answer is letter "A": Inflation risk.

Step-by-step explanation:

Inflation risk is the inherent risk goods and services have that make them increase in price over time. This increase is the result of an overall increment of prices in the market due to an inflationary period an economy may suffer.

Most governments tend to regulate inflation by increasing the interest rate which will make banks lend less money from the central bank (the Federal Reserve in the U.S.) which implies financial institutions will have a moderate amount of money end-users can borrow.

Answer 2

Answer: Inflation Risk

Step-by-step explanation:

Inflation is a continuous increase in the price level of goods and services over a period of time. Inflation shows that what you can buy with a dollar today is not necessarily what you can buy for a dollar in future. For example, a flat in New York being rented for $2000 in 2005 but in 2015 going for $3000. So the risk that the television that John wants will increase in price is inflation risk.