Does a greater risk imply a bad investment?

Q: All things remaining equal, a risk averse investor who is less risk tolerant would prefer an…

A: Risk Averse Investors are the investors which prefers to earn less returns with known risk or low…

Q: Explain the types of risk?

A: Introduction: There is a risk involved in any company decision, and in personal life decisions. In…

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: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: The desired rate of return on an investment should reflect the degree of risk involved. A.   True…

A: Riskier investments may give higher returns to the investors as they provide favorable ratio of risk…

Q: What is risk? What is the difference between systematic and unsystematic risk?

A: Risk: Risk can be defined as upcoming uncertainty about variation from anticipated earnings or…

Q: 1. What is a risk you aren't being paid to take?

A: Risks in simple words is a condition wherein a person ability is judged to take a decision which may…

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: How would the risk premium work out for a riskier investment?

A: A risk premium is a return on venture over the hazard free rate a financial specialist requires to…

Q: What is Pure Risk and Speculative Risk ? Give me some examples What is Fundamental and particular…

A: Risk refers to the probability of loss that could occur due to the volatility present in the…

Q: What are the real risks of an adverse financial outcome, especially in the short run?

A: Risk is the important factor of investment decisions to explain the capability of an investor to…

Q: What is the y risk-free investment?

A: Risk-free rate of return is the rate of return that an investor expects from an investment in any…

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: What is the criticism for using SMB and HML as risk factors?

A: The Fama and French Three-Factor Model (or Fama French Model for short) is an asset pricing model…

Q: be regarded as high risky when

A: Risk and return are positively correlated. If the risk for an investment is high, the more will be…

Q: Why is the additional risk not taken without expected additional return?

A: The risk-return tradeoff takes note of that the potential return increments with an expansion in…

Q: Does greater risk imply a bad investment?

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

Q: According to Peter Bernstein "When we take a risk, we are betting an outcome that will result from a…

A: Risks are the situations and conditions that have exposure to losses or damages. Risks expose…

Q: Do you believe on the principle-higher risk provides higher return? Can we achieve high return with…

A: Return is the reward which an investor will get by investing money in return and risk is the chance…

Q: Is funding a type of risk?

A: Funding means providing the funds to the party and charging interest rates from them. Firms need…

Q: What is investor overreaction? Which behavioral bias is primarily responsible for this effect, and…

A: Before going to give solution we need to know about some basic terms like investors. Investor is the…

Q: What kind of investment is considered to be risk-free?

A: A risk-free investment is an investment that has a minimum or no fluctuation from the expected…

Q: averse

A: Risk is involved in everything. Risks will be there right from the task that we do till the…

Q: How does/can a financial intermediary reduce the risk facing them due to Adverse Selection?

A: The question is based on one of the key issue in financial market, banking industry,  about the…

Q: Should a firm insure itself against all insurable risks that it faces? Explain.

A: Solution:- An Insurable risk is a risk which fulfills the criteria for insurance.For a risk to be…

Q: What do we mean by fundamental risk, and why may such risk allow behavioral biases to persist for…

A: Answer: Meaning: Fundamental risk is nothing but the loss arising out of situation which affects a…

Q: What is the purpose of NPV analysis? Be sure to discuss the concepts of risk and return in your

A: Net present value NPV is used quite extensively in capital budgeting decisions whether to accept or…

Q: What is meant by the phrase natural hedging againstexchange rate risk?

A: Hedging is a mechanism that is used to eliminate or minimize the risk of loss that is associated…

Q: When is the financial risk by far the most critical element to consider?

A: Introduction: Risk can be characterized in terms of the uncertainty of future consequences resulting…

Q: What would the SML look like if investors werecompletely indifferent to risk—that is, had zero risk…

A: Security market line (SML): It could be a line represented on a chart that serves as a graphical…

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: How important is risk to returns?

A: “Since you have asked multiple questions, we will solve the first question for you. If youwant any…

Q: Is the investment risk concerned with the range of possible outcomes from aninvestment?

A: For a business, there are many types of risks associated with it. Some of the risks are credit risk,…

Q: Why is it important to be able to quantify risk?

A: Risk is the chance that an outcome of an investment's actual gain will differ from an expected…

Q: The distinction between “pure risk” and “speculative risk” is important because only pure risks are…

A: “Fundamental risks” are those risks which affect a large segment of companies. But the risks which…

Q: any risk attached to a financial asset should not be considered when making an investment decision…

A: Financial asset A financial asset is referred to as a liquid asset that features stocks, bonds, bank…

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: Which of the following Incoterms (EXW, FCA, DPU, DAP) are in favor of the buyer in terms of risk?…

A: FOLLOWING INCOTERMS- EXW -EX WORKS FCA-FREE CARRIER DPU-DELIVERED AT PLACE UNLOADED DAP-DELIVERED AT…

Q: A simple investment will always be pure. True or false?

A: A pure investment is one in which a firm or an entity will never borrow funds from the project. A…

Q: Doing nothing is a viable investment alternative. True or False?

A: Investments are the methods through which individuals and companies invest or park their money and…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.