What is market risk?

Q: What is market interest rate?

A: The interest rate in which borrowers and lenders borrow and lend money to each other is called…

Q: What is investment timing option?

A: Option with reference to investment or project refers a significant option that can affect the…

Q: What Is Hedge against Marketplace Uncertainty?

A: Hedging is referred as the risk management strategy used to offset losses in investments by taking…

Q: What is the market risk premium (rM - rRF)?

A: The market risk premium can be found using the CAPM Model As per CAPM Model, expected return = Risk…

Q: What does the volatility value represents?

A: Volatility for a given product or market index is a factual proportion of the scattering of profits.…

Q: What is a cash flow hedge?

A:

Q: What are the risks of investing in an ESOP?

A: ESOP stands for Employee Stock Ownership Plan. It is a plan that gives an ownership interest in the…

Q: What is market model?

A: A market model is a numerical portrayal of the exchanges among different members, financial powers,…

Q: Define market risk

A: Market risk is the risk of an investment due to over all volatility in the market returns due to…

Q: What is an infeasible portfolio?

A: Portfolio:Portfolio refers to the collection or bunch of investment tools such as:StocksMutual…

Q: What is reinvestment rate risk?

A: The reinvestment rate risk is the potential decline in the interest income that tends to be a result…

Q: What is the y risk-free investment?

A: Risk-free rate of return is the rate of return that an investor expects from an investment in any…

Q: What is the risk free return?

A: Rate of return is the return percentage which an investor gets from the money which has been…

Q: Define the term exposure to financial risk?

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

Q: what does Market's Risk premium measure

A: Market's Risk premium is an important term used in the capital asset pricing model equation (CAPM)…

Q: What is financial risk?

A: Risk refers to the undesired consequences arises due to the uncertainty. In other words, risk refers…

Q: The Security Market Line plots _________ against ___________?

A: Systematic risk is the market risk or the undiversifiable risk which affects the overall market.…

Q: What is the risk premium?

A: CAPM is the method of calculating the expected return on investment. The formula to calculate the…

Q: What is the difference between business risk and financial risk?

A: Risk Analysis: The risk analysis is defined as the process of recognizing the potential problems…

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: What is risk return ratio?

A: Any susceptibility a corporation or organization has to factors that might affect profitability or…

Q: the current market risk

A: Cost of capital for security BBB = 6%  Cost of capital for security AAA = 16%  Beta of security BBB…

Q: What is market price?

A: The price for the business is the prevailing demand for the purchase or selling of an asset or…

Q: Calculate and label the market risk premium

A: Security Market Line or SML is the upward sloping straight line. This line is the graphical…

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: What is the difference between pure arbitrage and risk arbitrage?

A: Pure arbitrage refers to make a riskless profit without taking any risk while risk arbitrage refers…

Q: What is meant by the phrase natural hedging againstexchange rate risk?

A: Hedging is a mechanism that is used to eliminate or minimize the risk of loss that is associated…

Q: Explain Comparing Risk Premiums?

A: Risk premium is additional premium an investor achieves by investing in a riskier financial…

Q: What is market efficiency?

A: Market Efficiency term is taken from a paper written by Eugena Fama in 18970. Fama acknowledges that…

Q: What is the portfolio's return?

A: The total investment returns produced on individual assets multiplied by the weight class of that…

Q: Explain the difference between financial risk andbusiness risk.

A: Risk is referred as the chance of loss. An activity which leads to loss is termed as risk. The risk…

Q: What is counterparty risk?

A: Counterparty risk can exist in trading, credit, investment.

Q: what is the nominal risk-free rate

A: T-bills also known as treasury bills. T- bills are government bonds or debt securities which are…

Q: What are the similarities and differences between the CML and SML as models of the risk return…

A: CML is an abbreviation for Capital Market Line and SML is an abbreviation for Security Market Line.…

Q: Explain risks in Portfolio?

A: Introduction: Risk is nothing but a potential for emergence of unexpected occurrences. There is…

Q: What is market portfolio?

A: A pool of investments that comprises of all the available investment opportunities across the globe…

Q: What is the Efficient Markets Hypothesis (EMH)?

A: Efficient market hypothesis (EMH): It is other ways known as efficient market theory, could be a…

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: Compare speculative risk and pure risk.

A: Pure Risk is the possibility where there is loss or no loss. Speculative risk  is a possibility of…

Q: What is maturity risk premium (MRP)?

A: normally Maturity risk premium is the extra return that an investor will get for bearing the…

Q: Define market risk premium

A: Market risk premium  It is defined as a variance between an expected rate of returns on the market…

Q: What does “investment risk” mean?

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

Q: How are total risk, market risk, and diversifiable risk related?

A: There are different types of risk associated with the investment. Some can be controlled and some…

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.