Answered: any risk attached to a financial asset…

any risk attached to a financial asset should not be considered when making an investment decision because all financial assets are risky. true or false?

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter7: Planning The Audit: Identifying, And Responding To The Risk Of Material Misstatement

Section: Chapter Questions

Problem 6TFQ

See similar textbooks

Related questions

Q: How might one logically assess whether the acquisition of investment information or advice is…

A: To be economically justified it is necessary to find out the present value of benefits and compare…

Q: Investors will pay a premium to invest in risky assets. OA. True OB. False

A: Risk premium is the extra return that an investor receives for investing in risky assets.

Q: Indicate why you agree with justifications to the following statements: “An investor should be…

A: Risk are of systematic and unsystematic.

Q: The capital asset pricing model (CAPM) contends that there is systematic and unsystematic risk for…

A: Introduction : In simple words, capital asset pricing model or CAPM can be understood as a valuation…

Q: What if noncurrent asset is not a subtitle I can chose from? Is there another heading I can use or…

A: The non-current assets means those assets which are not current assets, i.e. they would benefit the…

Q: What is the causes of the financial risk?

A: financial risk - financial risk is the possible danger of losing money from an investment made by…

Q: sk is the potential for an investment to generate more than one return. A security that will produce…

A: While investment there are potential risk to the investment due to which return realized vary…

Q: Indicate why you agree or disagree with justifications to the following statements: - “An investor…

A: Diversified portfolio- It refers to a portfolio of investments in which unsystematic risk or firm…

Q: Can the risk premium be negative after an investment is undertaken or before?

A: The risk premium is the extra risk-free return to require the risk of project acknowledgment. This…

Q: Evaluation of the performance of an Investment center should only Include financial measures. True…

A: An investment centre is a business unit in a firm that can utilizes capital to contribute direct to…

Q: Which stage of the capital decision-making process is extremely important because inadequate or…

A: The capital decision making process is a long one involving different stages.

Q: Does greater risk imply a bad investment?

A: Risk assessment is the process for identifying and assessing risks associated with achieving your…

Q: What information is considered a necessary evil in constructing an investment policy statement?

A: Provide appropriate guidance on portfolio construction and management Maintain focus on the…

Q: How do investors account for risk when determining an asset’s value?

A: Asset valuation helps to determine the fair value of the asset. Various asset valuation models such…

Q: Even if behavioral biases do not affect equilibrium asset prices, why might it still be important…

A: Answer: There exist two reasons why the behavioral biases do not impact equilibrium asset prices.…

Q: Discuss the risks associated with short selling an asset. Use examples and empirical evidence in…

A: A short-selling of an asset or stock means that the investor sells the borrowed securities…

Q: Whether the following statement is true or wrong. Briefly explain your answer. "It is impossible to…

A: The asset which has no risk associated with it is known as risk free asset. The return from risk…

Q: According to the principle of conservatism, when faced with uncertainty about the value of an item,…

A: In bookkeeping, the principle of conservatism, otherwise called the doctrine of prudence, is an…

Q: Which of the following is TRUE about liquidity? a. All assets should be put in liquid asset so that…

A: The simplicity with which an asset, or security, might be changed into immediate cash without…

Q: Why might disinflation prove favorable to financial assets?

A: Disinflation is the reduction or lowering of the pace of inflation. In other words in situation of…

Q: Discuss the different types of risk that an investor may face when undertaking investment in…

A: Risk is the chance of not getting the amount or kind of return which an investor is expecting from…

Q: The ___ the expected return from a financial asset, the ____ the risk of not getting the money back…

A: Expected Return of Financial Asset:It is the expected profit or loss that is earned from the…

Q: What are the key factors that can lead to an under/overstatement of the investments balance?

A: Answer: There can always be under statement or overstatement of the investment balances.

Q: What are the ethical considerations in making subjective valuations of these complex…

Q: Which of the following is a suitable benefit to HCA? a. The profits of HCA are so unrealistic O b.…

A: Historical cost accounting (HCA) is the accounting method in which recording of transactions and…

Q: Cash is a vulnerable asset

A: Cash is most vulnerable asset because it monitor the cash flows of business. Perform bank…

Q: By choosing assets that do not exhibit a high positive covariance with each other, the systematic…

A: Systematic risk is the risk associated with the market and is inherited to all securities in the…

Q: Security selection refers to A. the allocation of assets into broad asset classes. B. choosing…

A: Securities selection is the process of selection of various financial securities to be included in…

Q: Critically evaluate the pros and cons of the following statement: Financial statements are useless…

A: The pros and cons of the given statement are discussed hereunder : Historical cost refers to the…

Q: What are some advantages of matching the maturities of claims against assets with the lives of…

A: Whenever something is going to give benefit in future, it is known as asset. The amount which is…

Q: Why would an investor apply the Fama-MacBeth Method in asset pricing assumptions?

A: The Fama–MacBeth method in asset pricing is used to estimate different parameters for asset pricing…

Q: Asset allocation is not recommended by financial planners because mixing different types of assets,…

A: Financial planners invest the money of the client into various assets like shares as well as…

Q: Real Estate can be a risky investment depending on where it’s purchased and the price it’s purchased…

A: Real Estate refers to a combination of real assets or assets that have physical existence such as…

Q: When adding a risky asset to a portfolio of may risky assets, which property of the asset has a…

A: Portfolios can consist of a variety of investments such as equities, bonds, commodities, cash and…

Q: Systematic risk is defined as: a risk that specifically affects an asset or small group of assets.…

A: Systematic risk refers to the uncontrollable risk produces by external factors that are not in the…

Q: Why is the fixed asset riskier than current asset?

A: In financial accounting, the company's financial statements assets are classified into two…

Q: How to deal with financial risk

A: Financial risk is always present in business situations but one thing we can do it that we can…

Q: What is hedging and how is it different from diversification? If a firm needs to manage its risk,…

A: A hedge is an investment that is made fully intent on diminishing the danger of unfriendly value…

Q: hich of the following is NOT a financial asset?

A: An asset is belongings or the resources of an individual, corporation, or country with the…

Q: Explain the following statement: “An asset held as part of a portfoliois generally less risky than…

A: An investment is refer as an asset purchased with intention to earn income at some time in future.…

Q: Explore the implications of short-selling and the inclusion of a risk-free asse

A: Short selling may be a trading or investment strategy that bets on the worth of a stock or other…

Q: What are the three sources, the owner of a risky asset should expect to earn a return from?

A: An asset which does not provide fixed rate of return is known as risky asset. The returns provided…

Question

any risk attached to a financial asset should not be considered when making an investment decision because all financial assets are risky. true or false?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 General Introduction

VIEW

Step 2 Explanation

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Why is risk considered the main consideration in any investment decision? How will you deal with risk in your personal life especially on issues related to investment scams?
The ___ the expected return from a financial asset, the ____ the risk of not getting the money back from that financial asset.
Whether the following statement is true or wrong. Briefly explain your answer. "It is impossible to have an asset that is risk-free for all investors.” [Hint: Consider the relationship between the investment period of investors and asset maturity, inflation and other factors.)
The value of an investment can be defined in numerous ways. Which is FALSE? a. It is the value determined by demand and supply. b. It is an objective estimate wherein the risk preference of the investor is considered. c. It is the present value of the cashflows on the investment d. It is dependent on the perceptions of the investor.
Technically, the required return of an investment can be determined by determining the investments risk profile. However, many intangible factors influence an investor’s decision to invest. Discuss the intangible factors that may come into play in the investment decision process.
Explore the implications of short-selling and the inclusion of a risk-free asset.
What information is considered a necessary evil in constructing an investment policy statement?
TRUE OR FALSE Financial sector creates products for the management of risk, thus risk can be abolished fully.
Critically evaluate the pros and cons of the following statement: Financial statements are useless because they present assets at their historical costs rather than at their fair market values.
Market risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk
What are some advantages of matching the maturities of claims against assets with the lives of theassets financed by those claims? Is it feasible for afirm to match perfectly the maturities of all assetsand claims against assets? Why might a firm deliberately mismatch some asset and claim maturities?
What are the real risks of an adverse financial outcome, especially in the short run?