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How do you measure an investor's risk aversion?
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- Describe the various types of risks to which investors are exposed, as well as the sources of return.Why are investors risk-averse? How can investors deal with different degrees of risk?Explain the difference between (a) stand-alone risk and (b) risk in a portfolio context. How are they measured or calculated, and are they relevant to investors?
- How do risk premiums influence financial decisions regarding risk and return?Explain what is the criterion used by a rational investor for choosing a financial investment in terms of its risk return combination.How do an investment's required rate of return vary with perceived risk? Explain with an example?
- c) Explain what is meant Market Risk and by Specific risk. How can an investor reducethese risks?How can an investor eliminate Systematic risk?How do you perceive the relationship between risk and return in the context of investment portfolios? Can you provide examples of how an investor might balance the two, and what factors influence their decision-making process in achieving an optimal risk-return profile?
