Discuss the following statement: “A project may not be very riskyin spite of its high sensitivity to certain variables.”

Q: 76. You often hear about the trade-off between risk and reward. Is this trade-off part of decision…

A: Higher risk usually leads to higher profits. An investor will be able to make only a risk-free rate…

Q: What determines the acceptable level of Detection Risk?

A: Detection Risk:   It is a chance that an auditor will fail to identify any material misstatement…

Q: Explain the difference between systematic and unsystematic risk. Also explain why one of these types…

A: Financial markets are full of financial risks because these markets are related to the trade of…

Q: Why is there conflict between the NPV and IRR criteria between projects Y and Z? Which is typically…

A: In this question, we are required to determine the reason for conflict between IRR and NPV. Also, we…

Q: Which is least likely?  A. For the risk-seeking manager, no change in return would be required for…

A: Risk and return both are related to each other and depending upon the nature of managers or…

Q: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: Discuss how diversification reduces firm specific risk.

A: Diversification is investing money in many investments rather than a single investment. In…

Q: What is efficient set? Explain why rational investors will never chose a portfolio below the minimum…

A: What is efficient set?  Various configurations of securities yield various degrees of returns. The…

Q: Are you agree with the phrase (sentence): "In the following case, person who prefer project B to…

A: ENPV of Project A is 100 ENPV of project B is 120 Standard deviation of Project A is 15  Standard…

Q: Discuss some of the techniques available to reduce risk exposures.

A: Risk exposure is the estimated potential loss from ongoing or upcoming business operations. The…

Q: We have seen that market timing has tremendous potential value. Would it therefore be wise to shift…

A: Securities selection is the process where financial securities are chosen and included in the…

Q: What is performance testing and what are its bottlenecks?

A: It examines financial records, individual transactions, and the processes involved in obtaining and…

Q: What outcomes are possible with speculative risk?​

A: Speculative risk is a form of risk in which the outcome is unknown and there is a chance of both…

Q: What is takaful and how it can be used as a risk mitigation tool and write down the names of types…

A: Takaful may be a style of monotheism insurance whereby members contribute cash into a pool system to…

Q: If the CAPM were to hold, how would you identify the more risk averse investors?

A: If the Capital Asset Pricing Model (CAPM) were to hold, you could identify more risk-averse…

Q: A sound risk mitigation plan improves the DCF, as it lowers the risk premium in the discount factor.

A: Discounted cashflow:Discounted Cash Flow (DCF) analysis is a valuation method that calculates the…

Q: o, what about point 4 & 5  please in question  Which alternative is considered to be riskier, all…

A: Debt and Equity mix or only equity are the forms of capital structure which is chosen by the entity…

Q: A project with a negative NPV should be rejected. O True O False

A: Net present value  = present value of future cash inflows discounted at desired rate of return -…

Q: According to Peter Bernstein "When we take a risk, we are betting an outcome that will result from a…

A: Risks are the situations and conditions that have exposure to losses or damages. Risks expose…

Q: Which of the following statements is CORRECT?     b. Sensitivity analysis is a type of risk…

A: This is one of the measures that is undertaken by an investor under a certain set of assumptions to…

Q: "If a security plots below the security market line, it is: " O ignoring all of the security's…

A: Security market line : Security market line represents the beta and expected return of a security on…

Q: The following questions/inquiries can be used in determining risk, EXCEPT:

A: Before the risk assessments, asking questions is important. This help us to understand the situation…

Q: What happens when Control Risk is below the maximum level?

A:

Q: 1. a. Prove rigorously "Constant relative risk aversion CRRA implies decreasing absolute risk…

A: The Constant Relative Risk Aversion (CRRA) utility function is provided by W, where W signifies…

Q: Do you believe on the principle-higher risk provides higher return? Can we achieve high return with…

A: Return is the reward which an investor will get by investing money in return and risk is the chance…

Q: According to the CAPM, which of the following risks is irrelevant?   Select one: a. Unsystematic…

A: CAPM stands for Capital Asset Pricing Model. This theoretical model shows the relationship between…

Q: The slope of the security market line cannot be negative. Begin your answer with Consistent or…

A: The slope of the security market line is inconsistent with the market changes.

Q: When conducting a technical risk assessent, which of the following is true? project structure is…

A: When conducting a technical risk assessment, the level of project structure is a significant factor…

Q: The APT itself does not provide guidance concerning the factors that one might expect to determine…

A: The forces of APT should associate with important sources of uncertainty, that is., sources of…

Q: What should occur when a low level of Detection Risk is acceptable?

A: Detection risk is the risk that procedures performed to reduce audit risk will not detect a material…

Q: Discuss about systematic and unsystematic risk.

A: Risk refers to the movement or fluctuation in the value of an investment. The movement can be…

Q: What are some suggestions for risk management, typical response tactics, and IT system recovery…

A: Risk management:  A system of people, processes, and technology called risk management helps a…

Q: an efficient portolio ...... 1) minimise return for a given level of risk 2) minimise risk for a…

A: The chances or probability for investment including portfolio and real assets that they will lose…

Q: What principles are essential to an effective risk management program?

A: All types of organizations face different types of risks which may affect their chances of success.…

Q: Explain about the Hedging against fair value risk.

A: Financial instrument:   It is a monetary contract between two parties which acts as an evidence of…

Q: why is it important to identify weaknesses in key risk indicator's?

A: Risk is defined as future uncertainty, which is a probability event for the organization. Because…

Q: Even when NPV and IRR give the same​ accept/reject decisions, they may not give the same…

A: Answer: The correct answer is TRUE.

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.