Why is it helpful to analyze risk in comparison to all of the other potential rewards? Why is it also helpful to analyze risk in comparison to all other possible choices including the "risk of doing nothing"?

Why is it helpful to analyze risk in comparison to all of the other potential rewards? Why is it also helpful to analyze risk in comparison to all other possible choices including the "risk of doing nothing"?

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter7: Managing Ethics Risks & Opportunities

Section: Chapter Questions

Problem 1Q

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Concept explainers

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.

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What type of risk should the rational (aka not stupid) investor be concerned with? Systematic risk (the stuff we can't squeeze out) which is measured by BETA Unsystematic risk (the stuff we can squeeze out) which we don't measure because we can squeeze it out Total risk which is what a nondiversified investor would face
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