For any given distribution of outcomes and probabilities, describe how preferences over risk affect behavior.

Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?

A: Required rate of return refers to the rate which the investors expects from their investments. This…

Q: Risk can be subdivided into systematic and unsystematic risk. Describe each type of risk, the…

A: Systematic risk is the market risk or the undiversifiable risk of the asset which is unavoidable.…

Q: What is the significance of the Value at Risk (VaR) method?

A: The question is based on the concept of Value at Risk (VaR). VaR is a statistical measure of risk in…

Q: Why is the variance (or standard deviation) used as a measure of risk? What are the advantages and…

A: Reasons of utilizing variance as a risk measure: While consider a lesser risk in investment, fewer…

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: 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: What are quantitative measurements versus non-quantitative measurements with respect to risk?

A: Risk is used to describe the probability or uncertainty related to a future event with a favorable…

Q: Define Risk in general

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

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: which of the following headings best describes and measures gearing : a- financial position (risk)…

A: Gearing ratio is a financial ratio which compares equity of a company to its debt. Gearing ratio =…

Q: Explain the difference between a linear risk and a nonlinear risk.

A: Linear risk is an enterprise's risk, based on the traditional economic system of "take-up-dispose."…

Q: Basic Elements of Risk-Adjusted Returns?

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

Q: Briefly define and give examples of each of the following components of total risk. Which type of…

A: Risk refers to the variability of returns. It is the possibility or the likelihood that the actual…

Q: What type of risk is measured by the standard deviation?

A: Standard deviation is the measure of risk that the actual return of an investment will deviate from…

Q: What is risk return ratio?

A: Any susceptibility a corporation or organization has to factors that might affect profitability or…

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: Explain the Trade-Off between Risk and Reward?

A: The trade-off means to lose one thing to achieve another thing. For example An organization is…

Q: averse

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

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: 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: Describe relationship between risk and profitability.

A: Risk and profitability have direct relation. Lower the risk, lower is the return and Higher the…

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: What is the relationship of risk to the investment?

A: There is a direct relationship between risk and return in investment decision making. It means…

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: Define the term risk?

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

Q: Standard deviation measures which type of risk?

A: Standard deviation is an important measure of risk in finance.

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: Risk is the uncertainty that matters because it affects people’s welfare. Briefly define and give…

A: Diversifiable Risk: Unsystematic Risk is also known as Diversifiable Risk and can be defined as a…

Q: _________ factors are conditions and other variables that in their present, or absence, as the case…

A: Less start with basic understanding. For auditing being made, audit needs to make plan for…

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: What risk does Beta measure?

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

Q: Define a risk event.

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

Q: What is the relationship between risk and return?

A: Risk return relationship: The association among risk and return is recognized as the risk-return…

Q: How important is risk to returns and what are the key elements that must be analyzed in this regard…

A: Risk: The Cambridge dictionary gives one of the meanings of the word "risk" as:  "to do something…

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: One of the characteristics of an insurable risk is that a risk needs to be determinable and…

A: An insurable risk class is a group of people or businesses with similar characteristics that are…