Describe relationship between risk and profitability.

Q: Explain the types of risk?

A: Introduction: There is a risk involved in any company decision, and in personal life decisions. In…

Q: Differentiate between the Passing of Risk and the Passing of Ownership.

A: when the goods are sold the risk remains with the seller until the property in the goods is…

Q: Define stand-alone risk

A: Stand-alone risk:This refers to the risk linked with a single aspect of a firm or any particular…

Q: Explain risk arbitrage

A: It is a venture system to benefit from the narrowing of a hole of the exchanging cost of an…

Q: Risk management focuses on what?

A: Organizations assess the stakeholder’s responses as risks or opportunities which would affect the…

Q: Define Risk aversion

A: A risk averse saver is an investor who favors inferior returns with recognized risks somewhat than…

Q: What is the significance of the Value at Risk (VaR) method?

A: The question is based on the concept of Value at Risk (VaR). VaR is a statistical measure of risk in…

Q: Explain the types of investment risks with practical examples.

A: Investment risk - Investment risk is the probability of incurring losses from an investment made in…

Q: What is risk? What is the difference between systematic and unsystematic risk?

A: Risk: Risk can be defined as upcoming uncertainty about variation from anticipated earnings or…

Q: How to compare other measures of risk with VaR(value at risk

A: VAR or Value at Risk is quantitative risk measurement in portfolio or firm this measures and also…

Q: Define within-firm risk

A: Within-firm risk: Corporate (within-firm) risk is a hazard identified with an individual business.…

Q: Define Risk in general

A: In finance, risk is defined as the level of vulnerability that potentially creates financial loss…

Q: What types of information must be considered when it comes to risk and return?

A: Risk and return go hand in hand both are related to each other.There is direct correlation between…

Q: Define relevant risk

A: For investors, risks are classified into the following two types: Systematic risk/relevant…

Q: Define Liquidity Analysis?

A: Liquidity analysis is very essential as it shows the ability of the firm in paying short-term bills.…

Q: Define diversifiable risk

A: Diversifiable risk It is special to a given business or industry. Regularly known in the feeling of…

Q: Define the term Trade-Off between Risk and Reward?

A: Risk-Reward trade off refers to an investment principle which indicates higher the risk, higher is…

Q: Explain risk-neutral valuation

A: A risk-neutral valuation is a probability measure used to help pricing derivatives and other…

Q: Describe Inherent Risk.

A: Definition:   Audit Planning: Audit planning is the first step in the auditing process. The auditor…

Q: Discuss the importance and differences of liquidity, solvency and profitability.

A: Liquidity is the ability to turn an asset into cash or cash equivalent with ease. Solvency is the…

Q: What is risk and give examples

A: While making investment decisions risk and return should be taken into consideration.

Q: Basic Elements of Risk-Adjusted Returns?

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

Q: Define reinvestment rate risk

A: Reinvestment means investing without withdrawing the benefits (or) interest from the fund so that it…

Q: What information would be required to compute the risk-asset ratio under Basle I?

A: The risk asset ratio (RAR) measures the amount of a bank's total regulatory capital in relation to…

Q: what is return. Define risk and explain how it is assessed

A: Definition

Q: Explain the Trade-Off between Risk and Reward?

A: The trade-off means to lose one thing to achieve another thing. For example An organization is…

Q: / Risk and Return

A: There are 3 things given in the question and asked for an explanation of only 1. Risk and Return…

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: Distinguish between risk and return and briefly describe the relationship that exists between them.

A: Risk: It is the potential loss of an investor for investing in financial security based on his loss…

Q: How are total risk, nondiversifiable risk, and diversifiable risk related? Why is nondiversifiable…

A: Total risk is measured by the standard deviation of returns; it has two elements non-diversifiable…

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: Calculate the risk neutral probability

A: Risk neutral probability = (er*Δt - d)/(u-d) r is risk free rate. Δt is time period between each…

Q: (a) Define risk-free asset

A: An asset which generally having certain future returns and there is no chance of loss in return is…

Q: Define the term risk?

A: Types of risk: Investment risk Market risk Inflation risk Business risk Liquidity risk

Q: Define the following terms: Input risks, financial risks, property risks, personal risks

A: Input risks refers to the input price risk or commodity price risk. The risk arises for either of…

Q: Explain risk premium

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

Q: Explain risk aversion

A: Introduction: Risk can be characterized in terms of the uncertainty of future consequences resulting…

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: escribes the relationship between risk and return.

A: Risk and return are directly related.

Q: Provide one example of a calculation of risk and discuss its significance.

A: Risk is a chance that the actual gain or outcome from the investment will differ from the expected…

Q: Define value at risk (VaR)

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

Q: For any given distribution of outcomes and probabilities, describe how preferences over risk affect…

A: An outcome is a potential result of an experiment in probability theory. The likelihood of an event…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.