What Is Hedge against Marketplace Uncertainty?

Q: How is the risk-adjusted discount-rate approach more commonly practiced in the real world?

A: Risk adjusted discount rate approach is an approach which is used in assessment of various long-term…

Q: Differentiate between price risk and reinvestment risk.

A: Price risk is the risk of decline of the price of the investment or an asset after the underlying…

Q: What is hedge accounting?

A:

Q: Define counterparty risk

A: Counterparty risk means two parties enter into a contract to meet their specific obligations on a…

Q: What is a cash flow hedge?

A:

Q: Define market risk

A: Market risk is the risk of an investment due to over all volatility in the market returns due to…

Q: what is money market hedge

A: A money market hedge is a helpful tool that helps firms to maintain the exchange rate risk.

Q: What is the exposure to risk associated with a firm commitment to sell inventory that a fair value…

A:

Q: What is security Market Line (SML)? How it explains risk-return relationship? Explain different…

A: What is security Market Line (SML)? The security market line can be understood as a tool for…

Q: What is reinvestment rate risk?

A: The reinvestment rate risk is the potential decline in the interest income that tends to be a result…

Q: What is financial risk, and how does it arise?

A: Answer: Usually, financial risk refers to a situation where a company is not able to pay its fixed…

Q: How does risk affect interest rates?

A: The risk and the interest rates are in a direct relationship that is, the greater the risk the…

Q: Using examples, explain how firms are affected by both systematic and firm-specific risk. What is…

A: There are two types of risk systemic risk and firm specific risk.

Q: Define the term exposure to financial risk?

A: The question is based on the concept of Financial risk and its exposure.

Q: what does Market's Risk premium measure

A: Market's Risk premium is an important term used in the capital asset pricing model equation (CAPM)…

Q: The Security Market Line plots _________ against ___________?

A: Systematic risk is the market risk or the undiversifiable risk which affects the overall market.…

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 purpose of a cash flow hedge?

A:

Q: How is antidilution determined when multiple securitiesare involved?

A: Anti-dilution: An anti-dilution  refers to the convertible security or an option that are created…

Q: what are the sssumptions about market efficiency?

A: The theory that states that all the information available in the capital market is reflected in the…

Q: What is hedge portfolio?

A: Hedge portfolio It consists of the long position in a security i.e stock and also the long position…

Q: What is market approach measurement?

A: The market approach is just like comparing one set of assets with another both having the same…

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: How might you mitigate the risks that are mentioned? Market, Liquidity, and Operational.

A: Businesses face various types of risks that affect survival and growth of the company. Risks that a…

Q: What is market risk?

A: Investments in assets are subject to risks and uncertainty of returns  Risks can be systematic or…

Q: What is a fair value hedge?

A: Fair value hedge: It is a hedging method to manage the risk of changes in the fair value of a…

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 is commercial risk?

A: In financial terms, risk is defined as the possibility that the real profits from an outcome or…

Q: What is the difference between pure arbitrage and risk arbitrage?

A: Pure arbitrage refers to make a riskless profit without taking any risk while risk arbitrage refers…

Q: What is market risk premium?

A: Market risk premium is an additional return investor will receive for holding the additional risk in…

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: Explain Comparing Risk Premiums?

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

Q: what are the assumptions about market efficiency ?

A: Market efficiency refers to the market situation where stock prices reflect all available &…

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: Explain risks in Portfolio?

A: Introduction: Risk is nothing but a potential for emergence of unexpected occurrences. There is…

Q: Explain the interest rate risk?

A: The amount charged by a lender to a borrower for any type of debt is referred to as an interest…

Q: What is the Security Market Line (SML)? How isbeta related to a stock’s required rate of return?

A: Security market line (SML): It could be a line drawn on a graph that works as a graphical…

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: es tr ice of an individual security in such a market?

A: Market is efficient that means that information about the security is fully available in market.

Q: Compare speculative risk and pure risk.

A: Pure Risk is the possibility where there is loss or no loss. Speculative risk  is a possibility of…

Q: Define market risk premium

A: Market risk premium  It is defined as a variance between an expected rate of returns on the market…

Q: risk with practical examples

A: Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make…

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: Explain the term Market Timing strategies?

A: THE MARKETING TIMING STRATEGIES IS GIVEN BELOW-

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…