Q: Which of the following risks can be eliminated through diversification? a. Systematic risk b.…
A: Idiosyncratic risk is a risk for a particular investment or company. It is also called unsystematic…
Q: How does the Broader Diversification Reduce Risk?
A: Portfolio is a pool of different investments/assets. Investors can categorize the risks in two…
Q: Risk management focuses on what?
A: Organizations assess the stakeholder’s responses as risks or opportunities which would affect the…
Q: why does related diversification strategy and unrelated diversification strategy often fail
A: A business organization, entering into a new market where they do not have business with and create…
Q: Define market risk
A: Market risk is the risk of an investment due to over all volatility in the market returns due to…
Q: What is security Market Line (SML)? How it explains risk-return relationship? Explain different…
A: What is security Market Line (SML)? The security market line can be understood as a tool for…
Q: What are some actions that companies can take tominimize or reduce risk exposures?
A: The following are the actions utilized by companies to reduce exposure of risk: A company can…
Q: Define within-firm risk
A: Within-firm risk: Corporate (within-firm) risk is a hazard identified with an individual business.…
Q: How can we reduce investment risks by asset diversification?
A: Answer: Diversification is nothing but the strategy that reduces the risk by allocating assets to…
Q: Diversification can reduce or eliminate __________ risk. Group of answer choices all market…
A: Portfolio refers to basket of different financial assets in which investment is made by single…
Q: Define diversification
A: DiversificationIt is a strategy for the management of risk. Allocating the resource in the different…
Q: Define diversifiable risk
A: Diversifiable risk It is special to a given business or industry. Regularly known in the feeling of…
Q: Explain Diversification Benefits with example?
A: Following are the benefits of diversification: Reduce the risk of loss: Portfolio diversification…
Q: quantitative risk analysis:
A: Quantitative risk analysis assess the risk associated with a particular monetary item.
Q: Using examples, explain how firms are affected by both systematic and firm-specific risk. What is…
A: There are two types of risk systemic risk and firm specific risk.
Q: Explain risk-neutral valuation
A: A risk-neutral valuation is a probability measure used to help pricing derivatives and other…
Q: How do companies manage risk? What are the factors that contribute to a high-risk project?
A: In business there must be ups and downs in their business surroundings. In every business there…
Q: a) What is the general characteristics of Risk Financing – Risk Retention Methods
A: Hi, Thanks for the Question, Since you asked multiple questions, we will answer first question for…
Q: Explain political risk
A: Political risks are important to be considered because they have an impact on the profitability…
Q: Define operating leverage with examples and why it is potentially risky.?
A: Operating leverage is used to measure a company’s fixed costs as a percentage of its total costs. A…
Q: Which are the benefits of diversification?
A: The question is based on the concept of diversification. Diversification is a technique to spread…
Q: Market risk is referred to as: systematic risk. total risk. diversifiable risk. asset specific…
A: Market risk is the type of risk that affects the whole market. Market risk is not specific to a…
Q: How might you mitigate the risks that are mentioned? Market, Liquidity, and Operational.
A: Businesses face various types of risks that affect survival and growth of the company. Risks that a…
Q: What does it mean that portfolio diversification can reduce risk, and how does the efficient…
A: Risk is the measurable probability of loss on an investment. It includes the possibility of losing…
Q: How are total risk, nondiversifiable risk, and diversifiable risk related? Why is nondiversifiable…
A: Total risk is measured by the standard deviation of returns; it has two elements non-diversifiable…
Q: What are the differences between bottom-up and top-down approaches to security valuation? What are…
A: A top-down method to security evaluation starts with an examination of the worldwide and national…
Q: Describe relationship between risk and profitability.
A: Risk and profitability have direct relation. Lower the risk, lower is the return and Higher the…
Q: How can diversification reduce risks? Give examples from the rea world
A: Diversification is the process of managing risk which mixes the individual investments in a…
Q: How should firms evaluate projects with different risks?
A: Project evaluation is carried out by organization to know if a particular project is suitable for…
Q: Describe how a portfolio manager may help to mitigate the impact of these risks on portfolio.
A: Portfolio manager is the individual or the group of people who is professional in his field,…
Q: Explain Broader Diversification Reduces Risk?
A: The investment in different financial assets is known as the portfolio of an investor. The…
Q: How to minimize or eliminate risk using diversification or other means.
A: Diversification is a process investment in multiple assets with the available amount.
Q: Define risk-free asset?
A: Risk-free means that anything which does not have any kind of risk associated with it. They are free…
Q: Question 2 | What conditions must exist for diversification to be an effective risk response? How…
A: Diversification is a risk management strategy or approach in which a portfolio has a diverse set of…
Q: what should a rebalancing strategy include from a naive diversification perspective?
A: Investors can use rebalancing to ensure that their portfolio remains aligned with their desired risk…
Q: What is idiosyncratic risk? How does it differ from market risk?
A: Idiosyncratic risk or unsystematic risk or specific risk is that risk which belongs to specific…
Q: What are pros and cons of diversification strategy?
A: A business organization, entering into a new market where they do not have business with and create…
Q: Define Market-oriented investors
A: Putting amount in a scheme to earn return is known as investment. Before making an investment,…
Q: It is possible to eliminate all risk by diversification? Explain your answer
A: Diversification is a technique used to reduce risk by investing in variety of assets. It is a risk…
Q: Describe the risk and return profiles of various investment vehicles and the importance of…
A: Investment vehicles refers to the different category of financial assets that are being offered in…
Q: Discuss how diversification can enhance risk reduction?
A: Introduction : Diversification can be understood as the act of distributing resources in such a…
Q: The type of the risk that can be eliminated by diversification is called
A: the type of the risk that can be eliminated by diversification is called
Q: How are total risk, market risk, and diversifiable risk related?
A: There are different types of risk associated with the investment. Some can be controlled and some…
Discuss how diversification reduces firm specific risk.
Step by step
Solved in 2 steps
- Discuss how diversification can enhance risk reduction?What is hedging and how is it different from diversification? If a firm needs to manage its risk, will you recommend diversification or hedging? Why?Describe how underinvestment and asset substitution can destroy firm valueand how risk management can mitigate these problems.
