Why does standalone risk differ from portfolio risk? Explain and give examples! Relates your answer with CAPM!

Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?

A: Required rate of return refers to the rate which the investors expects from their investments. This…

Q: Define the term Risk-free real return?

A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…

Q: Give a definition of a "return". Why do we need to incorporate risk into return (discount rate)?

A: Investment: An investment is when money is used now with the goal of increasing its value later. In…

Q: explain what is the risk-return principle with one example

A: The risk-return principle is a fundamental concept in finance that states that the potential return…

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: What outcomes are possible with speculative risk?​

A: Speculative risk is a form of risk in which the outcome is unknown and there is a chance of both…

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: xplain the difference between (a) stand-alone risk and (b) risk in a portfolio context. How are they…

A: Stand-alone In terms of how they are calculated and analyzed, risk and portfolio risk are not the…

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: How do you determine the expected return and risk?

A: a) Expected return and standard deviation of a portfolio is calculated as below Here, wV= weights of…

Q: Basic Elements of Risk-Adjusted Returns?

A: Introduction: Risk adjusted return is a methodology for calculating and evaluating the returns on an…

Q: what is return. Define risk and explain how it is assessed

A: Definition

Q: What is the purpose of NPV analysis? Be sure to discuss the concepts of risk and return in your

A: Net present value NPV is used quite extensively in capital budgeting decisions whether to accept or…

Q: What is the difference between hedging risk and spreading risk?

A: Hedging risk is a strategy used to reduce the risk of adverse price movements in a financial asset…

Q: Explain Comparing Risk Premiums?

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

Q: Explain if the operational risk is considered a risk or uncertainty? Why? If it is a risk, how can…

A: Operational Loss:   The risk involved in failures of Man, Machine, Material, and Methods during…

Q: identify the assumptions underlying the interest coverage ratio appropriate measure for analyzing…

A: The interest coverage ratio is a debt ratio and profitability ratio used only to calculate how…

Q: Is there a relationship between risk and return in building an effective portfolio?(explain

A: Portfolio management involves prioritization, selection and control of projects and programs of an…

Q: what is the risk-free rate (rf)?

A: Risk free rate is also called as treasury bill rate. This treasury bill rates are free from default…

Q: A portfolio manager is holding the following investments: Stock Amount Invested Beta X RM10 million…

A: Risk free rate = 5% Market Risk Premium = 5.5% Beta of X = 1.4  Beta of Y = 1.0 Beta of Z = 0.8

Q: risk with practical examples

A: Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make…