Please select the risk that affect only a single company? market risks. specific risks. systematic risks. risk premiums.

Q: Which of the following statements are true about systematic risk? Select one or more: a. Beta is a…

A: Beta: Beta is an idea that describes the normal move in a stock in comparison with developments in…

Q: Clearly explain why some risks are systematic and others non-systematic. How is it possible for an…

A: There are various types of risks that are faced by organizations in order to conduct its day to day…

Q: Describe Asset/Liability Models and explain why it is better than Value-at-Risk Models for Portfolio…

A: The process through the use of assets and liabilities are managed in such a way that the risk of…

Q: Explain what is the risk component of financial assets.

A: Risk can be described as the likelihood of an unexpected or negative outcome. Any act or activity…

Q: Among the factors considered in the quantitative models of default risk: a. Business cycle b.…

A: Business cycle is defined as an economic cycle that is linked with fluctuation of the GDP in its…

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: Which of the following risks cannot be hedged? A. Credit B. Liquidity C. Currency D. Duration

A: Some risk can be hedged using derivatives

Q: Give specific examples of systematic and unsystematic risk. How many different securities must be…

A: Systematic Risk is the risk that is inherent to the market. It is also known as market risks. This…

Q: How the following risk can be mitigated and managed 1. Market risk 2. Liquidity risk 3. Insolvency…

A: Market risk is also known as systematic risk, that involves uncertainty with any investment…

Q: How does the magnitude of firm-specific risk affect the extent to which an active investor will be…

A: The question is based on the role of risk factor in selection of portfolio, which is simply…

Q: Define counterparty risk

A: Counterparty risk means two parties enter into a contract to meet their specific obligations on a…

Q: isk can be separated into undiversifiable risk and diversifiable risk. Discuss the difference…

A: In market there are many types of risk involved but broadly there are two types of risk…

Q: what is a credit risk, market risk and business risk. Give some examples. How can you hedge them?

A: The risk is referred to as the probability that actual results will be different from the expected…

Q: Discuss how diversification reduces firm specific risk.

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

Q: Question Details Unsystematic risk is also known as unique risk. asset-specific risk. diversifiable…

A: The objective of the question is to identify the different names by which unsystematic risk is known…

Q: 1. In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it…

A: Unsystematic risk is a risk that is distinctive to a particular firm or industry. Nonsystematic risk…

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: liquidity risk?  Define briefly with an appropriate example

A: Risk means uncertainties in the future. There is a high risk involved in every investment because…

Q: o risk premiums influence financial decisions regarding risk and re

A: Step 1 A risk premium is an investment return that is expected to generate more than the level of a…

Q: Explain why risk adjustments are important and how they can affect firm value.

A: Risk adjustments are a critical component of financial analysis and investment decision-making,…

Q: Differentiate between interest rate risk and reinvestmentrate risk.

A: The major representation of the interest rate risk is the differentiation in the bond market price…

Q: 16. helps the investor to determine the suitable types of investments. A. Risk taker B. Risk adverse…

A: Risk of an investment asset is the fluctuation possible on the return. The riskier the asset, higher…

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: How is risk defined and measured? How might the magnitude of the market risk premium impact…

A: In financial terms, the risk is referred to as the possibility that an outcome's actual gains will…

Q: Define the term exposure to financial risk?

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

Q: Which of the following is/are an examples of unsystematic risk of a stock   O a Political risk…

A: Operating Risk

Q: Describe how Investment Managers measure the non-systematic risk of their portfolio

A: Non-systematic risk refers to firm specific risk factors. This type of risk is usually eliminated or…

Q: Explain Risk Premiums, Interest Rate Risk, and Default Risk?

A: Risk premium: A risk premium is nothing but the return above the risk-free rate of return that an…

Q: Describe the relation between Risk and Returns that was introduced by Harry Markowitz

A: Modern portfolio theory, or MPT, is referred to as the method for portfolio management for reducing…

Q: How do you measure an investor's risk aversion?

A: The objective of this question is to understand how to measure an investor's risk aversion. Risk…

Q: Briefly define and give examples of each of the following components of total risk. Which type of…

A: Risk refers to the variability of returns. It is the possibility or the likelihood that the actual…

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 Capital Asset Pricing Model (CAPM) considers which type of risk in pricing the expected returns…

A: Capital Asset Pricing Model is used for pricing risky securities. It describes the risk and return…

Q: isk that affects at most a small num a. total risk b. portfolio risk c. unsystematic risk D

A: Risk refers to the form of uncertainties linked to a business proposal, investment, or even in the…

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.