Define the term Risk-free real return?

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 the market risk premium (rM - rRF)?

A: The market risk premium can be found using the CAPM Model As per CAPM Model, expected return = Risk…

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: Define market risk

A: Market risk is the risk of an investment due to over all volatility in the market returns due 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: Define expected rate of return on a portfolio

A: Expected Return: The expected return is the minimum required rate of return which an investor…

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 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: What is the risk free return?

A: Rate of return is the return percentage which an investor gets from the money which has been…

Q: What is the difference between the possible returns and the expected return?

A:

Q: Define the term exposure to financial risk?

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

Q: What is financial risk?

A: Risk refers to the undesired consequences arises due to the uncertainty. In other words, risk refers…

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 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: 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: 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: Define Expected return on a portfolio

A: The expected return is the profit or loss an investor anticipates on an investment that has known or…

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 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: Define the term Risk-Adjusted Discount Rate Approach?

A: The estimation of the present value of cash for high-risk investment is known as a risk-adjusted…

Q: Describe the Methods for Finding Rate of Return?

A: Capital budgeting is the process a company follows to decide whether to purchase a fixed asset or…

Q: Can we consider Project Risk by Discount Rate?

A: The discount rate is an interest rate that is used in computing the present value of the future cash…

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: Calculate Portfolio Returns with example?

A: The determination of profit or loss on the investment in a portfolio is called portfolio return. The…

Q: Could you explain the term "financial risk" in simple terms

A: Financial risk - The risk of losing money on an investment.

Q: Explain risk premium

A: An investor investing in a risky asset would demand a greater interest rate to compensate for the…

Q: Define risk-free asset?

A: Risk-free means that anything which does not have any kind of risk associated with it. They are free…

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: what is the nominal risk-free rate

A: T-bills also known as treasury bills. T- bills are government bonds or debt securities which are…

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: 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 is maturity risk premium (MRP)?

A: normally Maturity risk premium is the extra return that an investor will get for bearing the…

Q: nually. Investors required rate of return is ce

A: Coupon rate =8.47% T=7 Face value=50,000 Price=45,000 Yield to maturity = C +(face value…

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: escribes the relationship between risk and return.

A: Risk and return are directly related.

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 does “investment risk” mean?

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

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: Explain portfolio risk

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

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.