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

Q: What does a failed net-investment test indicate?

A: Answer: Net investment test: The company will not overdraw at any stage on its return, and is thus…

Q: Explain the Opportunistic Investing strategies?

A: Opportunistic investing strategies are strategies that involve investment in highly risky…

Q: Are there sources of value in an investment? what they are? and give an example for both?

A: Yes, there are various sources of value in an investment. An investment is a stock or a bond. People…

Q: Define the term Risk-free real return?

A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…

Q: What are the risks of investing in an ESOP?

A: ESOP stands for Employee Stock Ownership Plan. It is a plan that gives an ownership interest in the…

Q: What are the benefits and corresponding risks of Financial Investment?

A: Financial Investments are investments that are made with the expectation to receive future financial…

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: 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: 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: why is a need for investor to evaluate the investment ?

A: All investments will have a certain percentage of risk. To control the future risks in the…

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: Why does standalone risk differ from portfolio risk? Explain and give examples! Relates your answer…

A: While making an investment, an investor is required to thoroughly examine all types of risks and…

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: Explain Target Return on Investment?

A: Investments are done to get the return on the same. Generally, investments are done when an…

Q: What is risk, and how does it affect decisions about investment?

A: Risk and return are related to each other while making investment.

Q: What is the risk premium?

A: CAPM is the method of calculating the expected return on investment. The formula to calculate the…

Q: What is risk return ratio?

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

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

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: What is definitions of this?   Systematic risk  Risk free rate of return  Market rate of…

A: Capital asset pricing model (CAPM) can be used to compute the return expected by the investors by…

Q: Illustrate the method of investment risk: Investment?

A: Following are the methods of investment risk: Investment: Standard deviation: Standard deviation…

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: 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: Explain Comparing Risk Premiums?

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

Q: How do you make an investment decision based on the IRR?

A: IRR is the return actually earned by the investor and discount rate is the return which the investor…

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: discuss the importance of considering risk when analyzing investments?

A: Risk refers to the probability of uncertainties about future .Risk may also be termed as volatility…

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: What is return on investment?

A: Return on investment  is a financial ratio which is measured as net income divided by the cost of…

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: Illustrate how risk related to investment

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

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: What does the term risk aversion mean, and howis risk aversion related to the expected return on…

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

Q: What does “investment risk” mean?

A: Risk is referred as uncertainty or loss. Financial risk is referred as the variability of actual…

Q: why do we need to quantify the investment risk and returns?

A: Almost all investments possess certain risks and return.

Q: What is the importance of market risk premium?

A: Market risk premium Variance of the market return and the risk-free rate. It depicts the equity…

Q: Illustrate investment risk?

A: Investment risk is the risk associated with the probability of losses occurring in relation to the…

Q: For which type of risk do you get rewarded with a higher expected return? a. Firm-specific risk b.…

A: Total risk = systematic risk + unsystematic risk

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…