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

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: How does the creation of a portfolio reduce risk? What type of assets should be included in a…

A: Introduction Portfolio: Any combination of financial assets, such as stocks, bonds, and currency, is…

Q: Portfolio risk is comprised of risk, risk. Select one: a. diversifiable; plus unsystematic

A: Risk is the amount of money lost from an investment. Risks are of two types. 1. Systematic risk 2.…

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 an infeasible portfolio?

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

Q: Differentiate between (a) stand-alone risk and(b) risk in a portfolio context

A: Investors can categorize the risks in two types. One is diversifiable risk and other one is…

Q: What is Pure Risk and Speculative Risk ? Give me some examples What is Fundamental and particular…

A: Risk refers to the probability of loss that could occur due to the volatility present in the…

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: liquidity risk?  Define briefly with an appropriate example

A: Risk means uncertainties in the future. There is a high risk involved in every investment because…

Q: In what circumstances would you use one of the available risk measurements used in Modern Portfolio…

A: Modern portfolio theory refers to the theory of investment that allows the investors for…

Q: Critically discuss the effect of diversification on portfolio risk. Is there any limit of…

A: A portfolio is the mixture of securities managed by the portfolio manager. We can take the amount 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: What is the expected return on a portfolio? How can the expected return on a portfolio be…

A:

Q: What is the risk premium?

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

Q: Basic Elements of Risk-Adjusted Returns?

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

Q: What is risk return ratio?

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

Q: Cakulate the expected retun and risk of a portfolio

A: Portfolio Risk: Portfolio risk is the measurement of variance between the assets and the targeted…

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: Calculate and label the market risk premium

A: Security Market Line or SML is the upward sloping straight line. This line is the graphical…

Q: How the risk and return trade-off can be applied in real life?

A: The risk-return tradeoff states that the return rises with an increase in risk. Investors use this…

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 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: Describe how a portfolio manager may help to mitigate the impact of these risks on portfolio.

A: Portfolio manager is the individual or the group of people who is professional in his field,…

Q: We said that options can be used either to scale up or reduce overall portfolio risk. What are some…

A: Options are the financial instruments that derive their value from the assets underlying the option…

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: identify the assumptions underlying the interest coverage ratio appropriate measure for analyzing…

A: The interest coverage ratio is a debt ratio and profitability ratio used only to calculate how…

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: Discuss the role of risk-free assets in the Markowitz Portfolio Theory.

A: Harry Markowitz always focused on lowering the risk and diversification in order to maximize the…

Q: b) Give a graphical example to present the positioning of. E Systematic risk E Risk free rate of…

A: Risk is the uncertainty associated with an investment. The investor receive higher return to…

Q: Why are covariance and correlation concepts so important in portfolio analysis?

A: In portfolio theory covariance is important since the portfolio variance is a mixture of individual…

Q: Explain risks in Portfolio?

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

Q: Define Arbitrage (risk-free) portfolio

A: An arbitrage portfolio is a portfolio with zero factor risk - all the factor sensitivities are equal…

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: 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: 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: Explain portfolio risk

A: Portfolio risk reflects the overall risk for a portfolio of investments. It is the combined risk of…