Both investors and gamblers take on risk. The difference between an investor and a gambler is that an investor   Group of answer choices   is normally risk neutral requires a risk premium to take on risk knows he or she will not lose money knows the outcomes at the beginning of the holding period

Q: Few rational investors hold portfolios of assets, and they are more concerned with the risk of their…

A: The answer is True

Q: Investors will pay a premium to invest in risky assets. OA. True OB. False

A: Risk premium is the extra return  that an investor receives for investing in risky assets.

Q: When a firm invests in money market instruments, it is taking _______ and should expect __________.…

A: Money market instruments are short term financing instruments used as tools for raising capital by…

Q: Equity investors expect to be compensated for two things

A: In financial terms, risk can be defined as the possibility that the real profits from an outcome or…

Q: Using a payback period rule tends to bias investors toward Select one: a. riskier investments. b.…

A: Payback period: This method is used to calculate how many years a project will take to recover its…

Q: Is it reasonable to ignore IDIOSYNCRATIC RISK and care only about MARKET (SYSTEMIC) risk? What about…

A: Definitions  Idiosyncratic risk : In simple words, idiosyncratic risk can be understood as the risk…

Q: True or false no need explanation  1. The shorter your time horizon , the less conservative you…

A: Note : As per the guidelines, only first three parts will be answered. Kindly post the remaining…

Q: *which of the following statements is true? Select one: O Investors sell a stock when required…

A: When the stock is overvalued, which means the market price of stock is more than the intrinsic value…

Q: Is the following statement true or false. Briefly explain your answer. é fe̟s cm "There can not be a…

A: Risk free asset is an asset in which the return from the asset is guaranteed because of the…

Q: Which of the following is NOT true? In risk-neutral valuation the risk-free rate is used to discount…

A: Risk-neutral valuation produces a valuation that is correct in all situations not just those where…

Q: The maln rule In Investing Is: Select one: O a. don't invest unless the percelved risk is high…

A: Investor should consider various aspects before investing in any security or portfolio. Some of the…

Q: Assume that CAPM does not hold and securities may earn abnormal returns. Suppose security A has a…

A: CAPM: It is a model that shows the relationship between the systematic risk & expected return of…

Q: Which of the following is true? IRR is the only measure that investors focus on when analysing the…

A: The objective of the question is to identify the correct statement about the Internal Rate of Return…

Q: Which strategy would be best for Kelly to deploy if she thinks the stock market will decline and she…

A: From the statement it can be interpreted that Kelly is long on the stock. Because of  this she wants…

Q: why are equities regarded as riskier than debentures for investor? a) because they are paid first…

A: The question is asking why equities are considered riskier than debentures from an investor's…

Q: O liquidity risk

A: Risks: Risks are the difference between the expected gains and the actual gains. Risks are core…

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: Whether the following statement is true or wrong. Briefly explain your answer. "It is impossible to…

A: The asset which has no risk associated with it is known as risk free asset. The return from risk…

Q: If the assumptions underlying the CAPM hold, then an implication from the model is that: A)…

A: The CAPM shows the relationship between the Systematic risk and the return expected by the…

Q: The so-called ``flight to quality'', which happens during a financial crisis, causes the risk…

A: The objective of the question is to understand the impact of a 'flight to quality' on the risk…

Q: hedge

A: Introduction: The term hedging refers to a strategy used by the investors in order to protect…

Q: nvestors choose deri tives

A: derivatives are financial instruments whose value is derived from an underlying asset such as bonds…

Q: The CAPM states that expected returns depend on an asset’s loading on market risk.

A: CAPM stands for capital asset pricing model. This model was developed by William. F. Sharpe. As per…

Q: TRUE OR FALSE: Assuming an efficient market, two financial securities cannot have the same risk and…

A: The efficient market hypothesis states that information is quickly and accurately reflected in asset…

Q: according to principles of behavioural finance, which statements is True? a) investors always behave…

A: The behavorial finance is a branch of finance which will believe that investors will be acting on…

Q: Mutual funds offer investors a.a lower return for less risk than what the investor could earn on…

A: The question implicitly talks about one of the most celebrated theory in finance called modern…

Q: Someone who is risk neutral A. does not care about an asset's risk B. places a value on an asset…

A: The term "risk neutral" refers to an individual's mindset when considering investment possibilities.…

Q: Adding insurance-linked securities to a portfolio can increase an investor's return without…

A: Insurance linked securities are financial instruments whose value is primarily based on insurance…

Q: Market neutral bets can result in ______ volatility because hedge funds use ______.  Group of answer…

A: Market-neutral bets or strategy is used to gain higher returns in all market conditions or…

Q: Derivatives are obtained to be used as hedging instrument to manage some kind of risk. for…

A: Derivatives are the type of instrument which is used for financial asset, liability or trading…

Q: What type of risk should the rational (aka not stupid) investor be concerned with?     Systematic…

A: A rational investor, also known as an "efficient" or "smart" investor, is an individual or entity…

Q: Investors do not get compensated for holding on to diversifiable risk. True False

A: Risk which are particularly to some companies and can be eliminated or reduced by investing in other…

Q: Suppose the financial institution is trying to minimise their exposure to changes in the underlying…

A: We have to find out the reasons why financial institutions go for both delta and gamma hedging. The…

Q: If investors are less certain about the economic outlook, they will: Select one: O a. raise capital…

A: Following is the correct answer

Q: One reason that firms exist is that most investors are risk averse, so they are not willing to make…

A: Risk is the possibility of loss or negative outcome, usually measured in terms of potential…

Q: Why is the historical investor risk premium so much higher than the implied investor risk premium in…

A: Risk premium refers to the return on the investment that is expected by an asset as a yield that…

Q: he CAPM implies that heterogeneous agents hold the same risky portfolio a) even if they differ in…

A: CAPM: The Capital Asset Pricing Model (CAPM) is a mathematical model that describes the link between…

Q: Derivatives are used in risk management because they _____. a. diversify risks b. hedge risks c.…

A: In the world of Finance, risk can be classified into various types, such as :- Credit risk - It is…

Q: MNCs generally do not need to hedge because shareholders can hedge their own risk.

A: A global corporation is one that has operations in multiple countries. These companies are typically…

Q: Define risk-free asset (in no more than 3 lines). [Hint: Focus on the features of the asset itself.]…

A: There are various options available for investment. Some of them provide high or good returns or…

Q: Mutual bank managers recognize that their potential gains from taking higher risk are…….., while…

A: The financial institutions that accept deposits from the general public and provide loans to the…

Q: in

A: The stock also referred to as equity is a form of security that indicates that the holder of the…

Q: Listen An example of the no-arbitrage principle holding would be when all risk-free investments…

A: In a scenario where the no-arbitrage principle holds, risk-free investments should offer investors…

Q: Why is it reasonable to ignore diversifiable risk and care only about nondiversififiable risk? What…

A: Diversifiable risk is that risk that can be easily diversified by making the investment into…