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

Q: process

A: The optimal portfolio for any investor would include both risk free assets & risky assets. The…

Q: What is a satisfiable investment? When the present value of benefits surpasses the cost of an…

A: This question explains about the present value of benefits surpasses and the cost of an investment…

Q: Which of the following statements is correct concerning a mean-variance efficient portfolio of risky…

A: Every investor expects a higher return for a high level of risk they take. Investors who are willing…

Q: Explain the Opportunistic Investing strategies?

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

Q: risk-taker (likes to take risks) type of investor prefer equities over fixed income?

A: Most of investors invest in the equity and like to take high risk and would invest in stock market.

Q: What is an infeasible portfolio?

A: Portfolio:Portfolio refers to the collection or bunch of investment tools such as:StocksMutual…

Q: Is there an arbitrage opportunity? Explain. Calculate the risk premium interest rate that will…

A: Arbitrage opportunity arises when there exists a difference between the prices of similar item in…

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: 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: 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: Conceptually, how does an investor choose his or her optimal portfolio?

A: The point where any of the ‘indifference curve’ are tangent to the efficient set of portfolios is…

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: Does greater risk imply a bad investment?

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

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 makes the risk-adjusted discount rate approach appealing?

A: Answer: The approximation of the present cash value for high risk assets is called adjusted discount…

Q: What security provides a good estimate of the real risk-free rate?

A: A Treasury bill (T-Bill) is the short-term liability of US public debt supported for 1 year 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 is the potentially acceptable investment alternative?

A: An alternative investment is a financial asset that doesn't can be categorized as one of 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: Illustrate the method of investment risk: Investment?

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

Q: How does the diversification of an investor’s portfolio avoid risk?

A: Portfolio investments mean investments in the group of assets, securities, bonds, etc. Investments…

Q: What is the relationship between the efficient portfolio and the feasible portfolio?

A: An efficient portfolio can be defined as portfolio which maximizes return for given level of risk or…

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: 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: 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 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: How does the risk return trade-off relate to the financial manager's main goal?

A: The main goal for a financial manager is to generate the maximum value of the firm to its owners.…

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 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: What is the difference between a diversifiable riskand a nondiversifiable risk? Should stock…

A: The diversifiable risk or unsystematic risk: It may be a kind of risk particular to a given economy,…

Q: Does a risky investment always equal a big payoff and vice versa?

A: Risky investments are played by risky people only. Lets take an example for better understanding. Mr…

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: 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: 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: 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: Why are investors risk-averse? How can investors deal with different degrees of risk?

A: In the world of investment, the risk is price volatility. A volatile investment may either make you…

Q: Which are the different assets that have the potential to be combined efficiently in a portfolio…

A: The efficient frontier graphically represents portfolios that maximize returns for the risk assumed.…

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: How can we Consider Project Risk by Discount Rate?

A: In corporate finance, a discount rate is the rate of return used to discount future cash flows back…

Q: What statistical concept do many portfolio managers use to represent a risk when considering…

A: The return an individual or organisation gets from any investment portfolio is termed as investment…

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