Draw an indifference curve for a risk-neutral investor providing utility level .05.

Q: What must be true about the sign of the risk aversion coefficient, A, for a risk lover? Draw the…

A: The question is based on the concept risk attitude of investors in financial economics, there are…

Q: Explain how knowing the standard deviation of a security’s historical returns increases an…

A: The question is based on the concept, which establish relation between return and risk for…

Q: define risk in terms of variance or standard deviation of actual returns around an expected return.…

A: The right answer is d. Investment D: Expected  Return =10% , Standard deviation=15%

Q: which of the following quantifies how closely a manager's return pattern follows that of a benchmark…

A: Managers' performance is evaluated on the basis of pattern that follows with benchmark index.

Q: What happens to the SML graph when risk aversion increasesor decreases?

A: Risk Aversion: The ability of a human being to avoid the risk and eventually reducing losses that…

Q: w does expected shortfal

A: Introduction : Value at risk (VaR) can be understood as the metric that measures the magnitude of…

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: Define . Slope of SML and its relationship to risk aversion

A: Introduction: SML refers to security market line, it is a line indicating the relationship between…

Q: Briefly explain the fundamental trade-off between risk and return.

A: Fundamental trade-off among risk and return: Higher risk is related with larger chance of advanced…

Q: Discuss the difference between Systematic Risk and Unsystematic Risk. What kind of strategies we can…

A: Risk in finance is the situation that may or may not arise in the future and has an impact on the…

Q: Define the term Trade-Off between Risk and Reward?

A: Risk-Reward trade off refers to an investment principle which indicates higher the risk, higher is…

Q: What are the (a) expected return, (b) standard deviation, and (c) coefficient of variation for an…

A: The expected return on an investment refers to the weighted average of estimated returns and…

Q: omparing Value at Risk (VAR) and Expected Shortfall (ES), which is preferred by regulators for…

A: VAR that is value at risk and another is ES expected shortfall these are two methods to measure the…

Q: With respect to an investor's utility function expressed as: U = E(r) –Ao², which of the following…

A: Utility Function = Er-12Aσ2 where A is -4, 0 and 4

Q: Basic Elements of Risk-Adjusted Returns?

A: Introduction: Risk adjusted return is a methodology for calculating and evaluating the returns on an…

Q: iation of a security’s historical returns increases an investor’s underst

A: A standard deviation is a tool used in finance to measure the volatility and risk associated with a…

Q: what is return. Define risk and explain how it is assessed

A: Definition

Q: Which alternative should be selected? Use a challenger-defender rate of return analysis.

A: Given,  Particulars Projects A($) B($) C($) D($) Initial investment 8500 18500 26500 30000…

Q: averse

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

Q: Examine (i) the relation between market returns and investor sentiment, and (ii) the relation…

A: the relationship between the market returns investor sentiment and conditional volatility is stated…

Q: What makes the risk-adjusted discount rate approach appealing in practical application?

A: Answer: The discount rate may be changed to offset the risk involved in a project in order to…

Q: Calculate the risk neutral probability

A: Risk neutral probability = (er*Δt - d)/(u-d) r is risk free rate. Δt is time period between each…

Q: Why is the default F risk in a CMBS offering given more attention?

A: A default risk is the likelihood that the guarantor of a bond won't have the option to reimburse the…

Q: What does a project’s stand-alone risk reflect?

A: Stand alone risks are risks that are associated with a particular asset or a project. Companies when…

Q: Explain Comparing Risk Premiums?

A: Risk premium is additional premium an investor achieves by investing in a riskier financial…

Q: Present the internal rate of return criterion and its strengths and weaknesses.

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: Explain if the operational risk is considered a risk or uncertainty? Why? If it is a risk, how can…

A: Operational Loss:   The risk involved in failures of Man, Machine, Material, and Methods during…

Q: Explain the difference between financial risk andbusiness risk.

A: Risk is referred as the chance of loss. An activity which leads to loss is termed as risk. The risk…

Q: Explain risk premium

A: An investor investing in a risky asset would demand a greater interest rate to compensate for the…

Q: Another name for the expected value of an investment would be: Answer a. The mean value b. The…

A: An Expected Value is an anticipated value for an investment at some point in future.

Q: What are the similarities and differences between the CML and SML as models of the risk return…

A: CML is an abbreviation for Capital Market Line and SML is an abbreviation for Security Market Line.…

Q: What is the forecasting risk when falling decisions based on the nvp rule?

A: NPV  The method in which the present value of both cashflow and inflows are calculated using a…

Q: Provide a descriptive formula for each of the following (e.g., Total risk =?+?):   a. Total risk=…

A:

Q: What risk does Beta measure?

A: There are two types of risks: 1) Systematic risk 2) Unsystematic risk 1. Systematic risk : It is…

Q: escribes the relationship between risk and return.

A: Risk and return are directly related.

Q: Define conditional value at risk (CVaR)

A: The question is based on the concept of conditional value at risk , it is a risk assessment process.…

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: what does high value of standard deviation mean on risk-return ratio

A: Risk-return ratio is the ratio which shows the risk which an investor will get for having one unit…