Explain risk of overreliance and risk of underreliance in brief.

Q: Define stand-alone risk

A: Stand-alone risk:This refers to the risk linked with a single aspect of a firm or any particular…

Q: isk can be separated into undiversifiable risk and diversifiable risk. Discuss the difference…

A: In market there are many types of risk involved but broadly there are two types of risk…

Q: Hedging is used to deal with three areas of risk exposure. Which are those risks? Name them.

A: Following are the three areas of risk exposure: Transaction risk: Transaction risk alludes to the…

Q: Discuss some of the techniques available to reduce risk exposures.

A: Risk exposure is the estimated potential loss from ongoing or upcoming business operations. The…

Q: Explain what is risk decompositon

A: Risk is referred as the future uncertainty with reference to the deviation from an expected earnings…

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: Define Risk in general

A: In finance, risk is defined as the level of vulnerability that potentially creates financial loss…

Q: Define relevant risk

A: For investors, risks are classified into the following two types: Systematic risk/relevant…

Q: What is event risk?

A: Event risk is the likelihood of a sudden event adversely affecting an organization, industry, or…

Q: +ve risks and -ve risks

A: A risk is an unexpected event that may impact and affect any area of your project says, people,…

Q: Define certainty equivalent method

A: Certainty equivalent method: Certainty equivalent method is a risk analysis technique used in…

Q: Describe Detection Risk.

A: Risk: It is the uncertainty about the future events of the company. The adverse chances of choosing…

Q: Describe Inherent Risk.

A: Definition:   Audit Planning: Audit planning is the first step in the auditing process. The auditor…

Q: Describe Control Risk

A: Audit Risk: The risk of issuing an unqualified audit report due to failure in detecting material…

Q: Compare judgmental, time series, and causal forecasting models.

A: Judgmental models are the subjective criteria in which gauges are based on master ideas. Individuals…

Q: Define Operational risk.

A:

Q: / Risk and Return

A: There are 3 things given in the question and asked for an explanation of only 1. Risk and Return…

Q: What should occur when a low level of Detection Risk is acceptable?

A: Detection risk is the risk that procedures performed to reduce audit risk will not detect a material…

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 is Projected Misstatement?

A:

Q: Determine C's at-risk

A: A partnership can be defined as a form of business in which two or more entities agree to run a…

Q: Distinguish between: Systematic risk and Unsystematic risk

A: The risks faced by the company arises from both micro as well as macro levels. The risk arising out…

Q: Discuss the Beta of  as measure of systematic risk.

A: In finance systematic risk refers to that risk which is inherent to the entire market. As the risk…

Q: Define risk

A: Risk can be defined as whenever there are chances that the investments’ actual outcomes are…

Q: Define the term risk?

A: Types of risk: Investment risk Market risk Inflation risk Business risk Liquidity risk

Q: What is the Allowable Risk of Over-reliance?

A: Auditor has to test the account balances and classes of transactions and has to do both control…

Q: Identify the weakness and the risk relating to the above.

A: Answer: The weakness is the shortcoming in any process and risk is the factor that result due to…

Q: What are the two stages in risk assessment?

A: Risk assessment is the process which involves analysis & identification of events that can have…

Q: Explain relevant risk

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

Q: rive CAPM and explain the concept of systematic risk

A: Systematic Risk – These are market risks—that is, general perils of investing—that cannot be…

Q: How is VaR used to limit risk?

A: Value at Risk (VaR) a statistical tool which measures and quantifies financial risk a firm or…

Q: Define a risk event.

A: Risk Event:  When an event can cause losses to the company's stakeholders and investors due to…

Q: Explain how NPV varies with risks. Show your argument using formulate for cases with different…

A: NPV or Net present value is the difference between the present value of cash inflows and cash…

Q: Distinguish between diversifiable and non-diversifiable risk

A:

Q: Explain the concept of risk management

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

Q: Give an example of a risk that is clearly a diversifiable risk and one that is clearly a…

A: It refers to risk that can be eliminated through diversification. Those risks are firm specific,…

Q: Distinguish between exposure and risk.

A:

Q: Define risk of material misstatement.

A: Material misstatement represents the statement presented in the financial statement which is…

Q: Explain direct-effect noncompliance.

A: Direct-effect noncompliance: Direct-effect noncompliance produces direct and material effects on…

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.