Market potential is an example of an economic risk measure. O True O False

Q: Compare M&M Theorem Proposition 1 and Proposition 2 in perfectly efficient market and in the real…

A: The M&M (Modigliani & Miller) approach is used to make investment decisions easily by…

Q: What are the assumptions of efficient market hypothesis? Discuss.

A: The efficient market hypothesis (EMH) is a hypothesis theory which states that share prices reflect…

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: Under what circumstances is stand-alone and market risk most relevant?

A: Stand-alone risk is the risk associated with a single investment or project, and it is typically…

Q: _______ is a measure of risk while _______ is a measure of risk and liquidity.

A: Capital budgeting is the process of distributing the resources(finance) of the organization in…

Q: Market risk cannot be eliminated. OA. True OB. False

A: The financial market can be defined as the market place which includes the trading of securities and…

Q: Are you agree with the phrase(sentence): "The indifference (exchange) risk - return curve slop of a…

A: Exchange rate indifference curve indicates that the change in demand for goods and services with…

Q: w does expected shortfal

A: Introduction : Value at risk (VaR) can be understood as the metric that measures the magnitude of…

Q: Does the Efficient Market Hypothesi hold true? Why or why not?

A: The efficiency of the market relates to how efficiently prices represent all available information.…

Q: If the expected rate of return for the market is not much greater than the risk-free rate of return,…

A: If the expected rate of return for the market is not much greater than the risk-free rate of return,…

Q: A risk-free asset by definition has a beta of zero. OA. True B. False

A: Required return formula as per capital asset pricing model is: Required return = Risk free rate…

Q: How would the risk premium work out for a riskier investment?

A: A risk premium is a return on venture over the hazard free rate a financial specialist requires to…

Q: What is Pure Risk and Speculative Risk ? Give me some examples What is Fundamental and particular…

A: Risk refers to the probability of loss that could occur due to the volatility present in the…

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 are the risk implications for an investor for a returns series that exhibits fat tails?

A: Fat tails means that there are more than three standard DEVIATION movements more than normal…

Q: ate two reasons why the strong form of market efficient is important

A: Efficient market hypothesis is very important concept in the stock market analysis and understanding…

Q: ected rate of return concept differ from that of the rea

A: There are many method of valuation of stock based on expected rate and realized return and dividends…

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: The market efficiency hypothesis claims that, as a rule, the market value and intrinsic value of a…

A: The market  efficiency hypothesis posits that security prices reflect all available information,…

Q: Using examples, explain how firms are affected by both systematic and firm-specific risk. What is…

A: There are two types of risk systemic risk and firm specific risk.

Q: omparing Value at Risk (VAR) and Expected Shortfall (ES), which is preferred by regulators for…

A: VAR that is value at risk and another is ES expected shortfall these are two methods to measure the…

Q: Which of the following statements is true for compensation of risk? a. Higher the risk, lower is the…

A: The Statement for compensation of risk is as under-

Q: Under prospect theory, the shape of the utility function implies that investors are

A: Under prospect theory, the shape of the utility function implies that investors are: (A) Always risk…

Q: If we are speaking about the CAPM model and undiversifiable risks.    Then what is meant by…

A: CAPM model The Capital asset pricing model (CAPM) refers to an idea that describes the systematic…

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: O The market rate of return. O Zero rate of return. A negative rate of return. O The risk-free rate.

A: Expected rate on security depends on the risk free rate and market rate and risk related to security…

Q: what are the sssumptions about market efficiency?

A: The theory that states that all the information available in the capital market is reflected in the…

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: 3. The beta for the risk-free investment is closest to: A) 1. B) 0. C) Unable to answer this…

A: Beta is a measure of systematic risk which cannot be eliminated through diversification.  In other…

Q: Finaancial risk is not directly associate with..    a) ROE b) EBIT c) EPS d) EAT

A: The Financial risk is a risk of loosing money on am investment or investment opportunities.…

Q: Let rf be the risk free rate of interest. E[r e ] be the expected return of some risky asset.…

A: CAPM: CAPM is also called as Capital assets pricing model. Factors affecting CAPM return are risk…

Q: Are you agree with the - return curve slop of a risky has a negative slop."? explain why?**…

A: The exchange rate indifference curve is the curve between the exchange rate and demand for given…

Q: Can someone give an example or scenario about the following:  1. Capital Asset Pricing Model2.…

A: 1.

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: How can an investor eliminate Unsystematic Risk?

A: There are two types of risks: 1) Systematic risk 2) Unsystematic risk. Systematic risk is non…

Q: If the efficient market hypothesis is true, what are the implications for the investors?

A: Efficient market hypothesis: Efficient market hypothesis assumes states that stocks are traded at a…

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.