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

Q: What is Interest Rate Risk and Cash Flow Risk

A: Interest rate risk: The interest rate risk is the risk that occurs due to the change in the interest…

Q: Differentiate between (a) stand-alone risk and(b) risk in a portfolio context

A: Investors can categorize the risks in two types. One is diversifiable risk and other one is…

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: What is financial risk, and how does it arise?

A: Answer: Usually, financial risk refers to a situation where a company is not able to pay its fixed…

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: Define the term exposure to financial risk?

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

Q: What is risks and interest rate

A: Risks and interest rate are tied together in case of fixed income instruments like bonds.

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: What is definitions of this?   Systematic risk  Risk free rate of return  Market rate of…

A: Capital asset pricing model (CAPM) can be used to compute the return expected by the investors by…

Q: Market risk is referred to as: systematic risk. total risk. diversifiable risk. asset specific…

A: Market risk is the type of risk that affects the whole market. Market risk is not specific to a…

Q: Suppose that we can describe the world using two states and that two assets are available, asset K…

A: The rate of return on an investment with no default risk is referred to as the "risk-free rate."…

Q: What is exchange risk, as distinct from exposure?

A: Foreign exchange risk or foreign exchange exposure refers to the financial risk associated with a…

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 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 idiosyncratic risk? How does it differ from market risk?

A: Idiosyncratic risk or unsystematic risk or specific risk is that risk which belongs to specific…

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: Advantages and disadvantages of interest rate risk?

A: Interest rate risk refers to the potential risk that arises from the fluctuations in the prevailing…

Q: What type of risk is the risk that belongs to the market as a whole?     Systematic risk…

A: Risk is an inherent part of investing. There is always the possibility that an investment will lose…