Can the risk of a housing bubble be averted?

Q: As supplier of funds, households invest by purchasing cars or houses. Is it true or false?

A: Individuals or firms who save or make investments in the financial market are the suppliers of funds…

Q: How can we Include Risk in Investment Evaluation?

A: Risk is included in the investment evaluation  by using the following  methods like Beta, Standard…

Q: Why do economists say that people tend to be risk-averse?

A: Different individuals have different preferences towards risk or uncertainty. Most individuals are…

Q: How investors handle risk is an important topic that usually only economists observe.

A: Basically, risk the executives happens when an investor or fund manager investigates and endeavors…

Q: Deliberate specifally how and through which channelss the interest rate affects (negatively or…

A: Interest rates can impact the economic activities in different ways. When the interest rates are…

Q: How Forecasting plays an important role in stock market?

A: Forecasting plays an important role in stock market. Forecasting the future changes in stock market…

Q: How does risk sharing benefit both financial intermediaries and private investors?

A: Risk-sharing - risk sharing is a method of sharing risk between the participants.

Q: When the safe investments that pension funds usually rely on are paying less than 1 percent, then…

A: Pension funds are those funds that need to kept aside by the employer to be able to be given at the…

Q: “Fat finger” trades are sometimes blamed as the cause of “flash crashes” in financial markets. What…

A: What is a Flash Crash?  A flash crash can be defined as an occasion in electronic protections…

Q: Explain what is the risk premium?

A: A risk premium is the return in excess of the risk-free rate of return an investment is predicted to…

Q: Is the stock market "out of control?" How can the poor benefit from this financial institution?

A: A company or institution which is involved in the financial activities of the economy like,…

Q: Given two portfolios, one portfolio has a higher sharpe ratio than the other. Explain what this…

A: A portfolio with higher sharpe ratio is considered superior than the portfolio with lower sharpe…

Q: List three different ways that a risk-averse person can reduce financial risk.

A: Financial Risk would result in the risk which would be borne by the investor which results in the…

Q: What is the likelihood of government-issued bonds or treasury securities defaulting? * A. Can't say…

A: The answer is - D. Zero

Q: Give an example of a risk premium?

A: The expected risk-free rate of return on an investment is known as the risk premium. It is also the…

Q: How do information asymmetries affect financing decisions?

A: Answer - Asymmetric Information - This is th situation where one individual, firm or even country…

Q: What is Tesla Inc. in 2018 all about?

A: Introduction Elon Musk, Tesla's Chairman and CEO, tweeted on August 7, 2018, that he was…

Q: What is the difference between an asset and liability?

A: In economics and also in business(accounting), it is vital to weigh the assets that a company owns…

Q: What is financial crisis? What causes financial crisis? Is it possible it could happen again? Give…

A: Financial market disruption caused by decreasing asset values and insolvency among debtors and…

Q: hat is covariance, and why is it important in portfolio theory

A: Covariance is used in finance to measure the two variable's degree of movement together relative to…

Q: Can a financial market be complete and allow for arbitrage opportunities at the same time?

A: Arbitrage is a speculation technique where a financial backer all the while trades a resource in…

Q: Bankers have a reputation for conservatism in politics, dress, and business affairs. Is there an…

A: Yes it is rational. Th checking deposit that provided by the bank is the best example of the fiat…

Q: Why are financial intermediaries willing to engagein information collection activities when…

A: The financial intermediaries provide different instruments to their customers. They provide…

Q: What benefit do people get from the market forinsurance? What two problems impede the…

A: Future is uncertain and people dislike uncertainty that is the adverse risk. A rational response to…

Q: What is Interest Rate Risk and what is difference between Cash Flow Risk and Interest Rate Risk?

A: Interest rate refers to the amount of money that a lender will receive as an income or returns on…

Q: Investors have different preferences with regards to the risk: they can be risk averse, risk neutral…

A: The risk averse people are those person who always prefers lower risk among the different levels of…

Q: Provide an example of an asset market that you think could be an economist's definition of market…

A: Asset market bubble happens when market prices in some sectors increase over time and traded for…

Q: Give an example of a risk-free interest rate?

A: The rate of return on an investment that is theoretically devoid of any risk is known as the…

Q: How much liability does stockholder assume?

A: Shareholder: Any person, company, or organization holding stock in a specific company.

Q: How can asymmetric information problems lead to abank panic?

A: Asymmetric information refers to the situation when there is a lack of information in the market…

Q: An efficient financial market means transaction costs.  True or False?

A: Transaction costs are the costs associated with purchasing or selling a product or service.

Q: discuss efficient portfolios and what information they can provide

A: A portfolio is defined as a grouping of financial investments such as bonds, stocks, cash,…

Q: As an investor, how do you diversify against risk?

A: Diversification means allocating funds to various financial instruments that have different risk…

Q: Define the term Risk-Free-Interest Rate?

A: A risk-free interest rate is a rate of return on investment with the least risk or no risk. Since…

Q: How do economist define a "bubble"? Provide an example of an asset market that you think could be…

A: A bubble is a situation or phenomena when there are expectations of a huge rise in prices…

Q: When financial analysts talk about “firm value” or “market value”, what views do they take? What are…

A: The value, or market capitalization, of an organization, is one piece of the organization's…

Risk and Uncertainty

Uncertainty refers to a situation when there is one possible outcome of a decision but where the probability of occurrence of each particular outcome is not known or cannot be estimated.