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Do investors that hold riskier financial assets be cmpensated with higher rates of returns?
yes. most of the time they do...Higher the risk higher the return.
otherwise who would take risk , when you can get equivalent benefit without taking any risk.
for example government bonds, bank deposits that usually are considered risk free investments,
so defiantly there is some risk premium over risk free return for risky investment
What else can I help you with?
How much do investors earn a year?
Investor earnings can vary widely based on factors such as the type of investments, market conditions, and individual strategies. On average, stock market investors might expect annual returns of around 7-10% over the long term, while real estate investors may see different returns depending on location and property management. Additionally, some investors may experience higher returns through riskier assets, while others may focus on safer investments with lower yields. Overall, individual earnings will depend greatly on their investment choices and market performance.
How does the haircut scale determine the amount of risk associated with a particular financial asset?
The haircut scale is a method used to assess the risk of a financial asset by assigning a percentage that represents the potential loss in value. The higher the haircut percentage, the riskier the asset is considered to be. This helps investors and financial institutions manage and mitigate potential losses in their investment portfolios.
Why are bonds evaluated by rating agencies?
Bonds are evaluated by rating agencies to assess the creditworthiness of the issuer. The ratings help investors gauge the risk associated with investing in a particular bond. Higher-rated bonds are considered less risky and typically offer lower interest rates, while lower-rated bonds are riskier with higher potential returns.
Where can I get info on how to invest in penny stocks?
Investing in penny stocks is one of the riskier behaviors that traders and investors may engage in within the greater stock market.
Person who risks money in hopes of a financial profit?
An investor risks money in search of financial profits. Typically, the riskier the investment the higher the payoff will be for the investor.
do Investors demand higher expected rates of return on stocks with more variable rates of return?
Yes, investors typically demand higher expected rates of return on stocks with more variable rates of return, a concept known as risk-return tradeoff. Stocks that exhibit higher volatility are perceived as riskier investments, leading investors to seek greater compensation for taking on that additional risk. This expectation aligns with the principles of modern portfolio theory, where higher risks should correlate with higher potential rewards. Thus, more variable stocks generally attract higher required returns to entice investors.
What happens to a bond's yield to maturity if investors learn that the bonds are subordinated to another debt issue?
Nothing, but its coupon rate would likely decrease as it is now considered a riskier asset.
What sure a financial manager do When calculating NPV for two projects of differing risk?
adjust the overall discount rate higher for the riskier project
Will a bond's yield to maturity increase or decrease if a bond 's price increases?
as yield to maturity increases the bonds price decreases, because a higher yield to maturity means its riskier to investors
Which suppliers of funds bear the greatest risk and should therefore earn the greatest return?
Suppliers of funds that bear the greatest risk typically include venture capitalists and private equity investors, as they invest in startups and high-growth companies with uncertain outcomes. Additionally, high-yield bond investors face significant credit risk, as they invest in issuers with lower credit ratings. These suppliers require higher returns to compensate for the potential loss of capital associated with their investments in riskier assets. Consequently, the greater the risk, the higher the expected return to attract and reward these investors.
Why is investment consider to be riskier than saving?
Investment becomes costlier, when funds are invested in a company with hollow promises and returns are thus meagre, in comparison to investments in a company of repute. Whereas savings in bank FD or LIC policies are far less riskier and the return or outcome is well know at the time of investment itself.
What would you expect that since bonds are generally among the safest investments?
Since bonds are generally considered safe investments, you would expect them to offer lower returns compared to riskier investment options such as stocks. The risk associated with bonds is usually lower due to their fixed income nature, which makes them attractive to investors seeking capital preservation and steady income.
