Market risk embodies the following risks except: O a. Financial. O b. Interest rate. Tax. O d. Inflation. Clear my choice

Q: Question: Market Value 1. What kinds of liabilities are there in the market to be purchased?

A: Market value is a crucial concept in the realm of finance and economics, representing the current…

Q: Which of the following is a false statement of the market price of risk found in the Capital Market…

A: Portfolios that blend risk and return optimally are represented by the capital market line (CML).…

Q: assets that you add it to ii. The amount of a portfolio's risk that is diversified away depends on…

A: Step 1 Unsystematic risk refers to a general risk to the company or industry. Informal risk is also…

Q: Nominal Risk-Free Rate (NRFR) , considers the  conditions in the capital market and Expected rate of…

A: The Nominal Risk-Free Rate (NRFR) is the theoretical rate of return on an investment that carries no…

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: An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate…

A: Hedging is technique of reducing risk. This reduction in risk also results typically in a decrease…

Q: risk and what is the relation between interest rate risk and callable bonds. Explain with the help…

A: Interest rate risk : In simple words, Interest rate risk refers to the possibility of investment…

Q: The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the…

A: Based on CAPM, Expected return on security = Risk free rate + Beta * Market risk premium

Q: When would I use the arithmetic average risk premium (as opposed to the geometric risk premium)?

A: The arithmetic average risk premium is calculated as the difference between the average return of an…

Q: Which of the following is NOT an external method of interest rate risk management? *       A. Using…

A: An interest rate risk is the risk of negative affected of the value of an investment by unexpected…

Q: This is a generalized framework for analyzing the relationship between risk and return: a. capital…

A: Risk refers to the uncertainty related to the investment within the future. Risk arises within the…

Q: bond call price

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: What is financial market equilibrium? And then explain its relation to required rate of return.

A: Financial market equilibrium: Financial market equilibrium is a condition in which money supply…

Q: Explain the difference between the unbiased expectations theory of the term structure of interest…

A: There are different theories that describe how the interest rates are set.

Q: It is the uncertainty of future returns

A: A return can be defined as the money made on money invested over some period of time. A return can…

Q: Duration is a measure of interest rates risk. Select one: True False

A: The factors that can impact the bond duration are the time to maturity and the coupon rates. Longer…

Q: a. Explain the expectations theory of the term structure of interest rates. b. What do the shapes of…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: FINANCIAL RISK MANAGEMENT  1. Duration is a measure of interest rates risk. (True/ False) 2. Bond…

A: The answers and explanations are provided below:

Q: Which statement is not true regarding the market portfolio? Group of answer choices a. It includes…

A: A diversified investment portfolio comprising all marketable assets is represented by the…

Q: Both simple and compound interest represent the rate of return (ROR) on investments Select one: True…

A: Formula for simple interest = Principal x Interest x Time Formula for compound interest = Principal…

Q: Repo Instruments, Term Money and Call Money are part of a. Forex Market b. Money market c. Capital…

A: There are various markets -

Q: The capital asset pricing model expresses the cost of equity as a function of a return on riskless…

A: The term capital structure refers to the structure of debt and equity financing in the company. A…

Q: Bond investors prefer short maturities. This is based on: a.default risk b.liquidity risk…

A: Default risk is the risk that the bond issuer may go bankrupt and therefore may not be able to pay…

Q: According to portfolio theory, the total risk of a single risky asset can be divided into two types.…

A: The total risk of single asset is always the basis for expected rate of return of the Asset. Higher…

Q: Market risk ________.   a. is equal to the rate of return generated by a risk-free asset b.…

A: By simple diversification the total risk can be reduced but can not be totally eliminated. The…

Q: Which of the following statement is true a. Gold generally provides a hedge against inflation over…

A: A capital market is a market where the long-term securities and equity securities are traded.…

Q: Which one is the least risky option? A. Bonds B. Shares C. Treasury Bills D. Trading

A: Trading involves the buying and selling of financial instruments, such as stocks, bonds, currencies,…

Q: 3.Explain the difference between the following concepts in finance: a) Capital market & money…

A: a) Capital Market & Money MarketCapital Market: The capital market is a segment of the financial…

Q: Country risk, is also referred to as _____? a. Currency risk b. Political risk c. Market risk d.…

A: Risk -There are different types of risks and each risks originate from different situations.…

Q: Discuss the following operating hedge strategies 1. Risk Shifting 2. Price Adjustment clauses 3.…

A: Hedging is a strategy which is concern with  limiting the risk by reducing the price risk of…

Q: Which asset below is generally the most suitable benchmark measure of the risk-free return?…

A: Risk free rate is rate of return which is quite certain an can be attained without any problem and…

Q: Which of the following are characteristics of money market securities? I. Long term maturities.…

A: Money market securities refers to interest bearing securities that are highly liquid and highly…

Q: Which of the statements about the Arbitrage Pricing Theory MUST BE TRUE. I. There is only one…

A: There are two models of security pricing where different risk factors are considered along with the…

Q: An investment requires a total return that comprises: a real rate of return and compensation for…

A: Total return in case of an investment comprises of a real rate of return, compensation for…

Q: What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of…

A: Jensen's alpha is a single number that describes the predictive ability of a fund manager. The…

Q: Market risk arises from the level or volatility of market prices of assets. It involves the exposure…

A: Market risk is the chance of suffering losses as a result of price changes that are unfavorable for…

Q: Most evidence suggests that a positive maturity risk premium exists. How would thisaffect your…

A: The question is based on the concept of calculation of interest rate in a bond with association to…

Q: ) Finance Which one is a financial risk? Select one: a. Uncertainty about demand b. uncertainty…

A: Meaning of Financial risk is diffrent for different category of person. In case of individual who is…

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.