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Risk and return are not a function together, but affect one another indirectly by determining optimal levels of investment. Return is roughly the benefit of investing money into assets; risk is part of the cost of investing that money (due to uncertainty). The varying levels of risk and return change the cost and benefit of investing, thus shifting the equilibrium values of investment.
What else can I help you with?
How do you calculate risk - free return?
Risk free rate of return or risk free return is calculated as the return on government securities of the same maturity.
Basic concept of risk and return?
The higher the risk, the higher the return.
Relationship between risk and return?
risk is pre-stage for return...
What is risk return relationship?
The risk return relationship is a business concept referring to the risk involved in exchange for the amount of return gained on an investment. These two factors are directly proportional to each other, meaning the more return sought, the higher the risk that is undertaken.
Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
What does the risk return trade off mean?
additional risk is not taken unless there is an additional compensation or return is expected
How is the potential rate of return on investments related to the level of risk?
Higher risk investments have a higher potential return.
What is the risk-free rate if the expected return is 20.4 and beta is 1.6 and expected market return is 15?
expected market return = risk free + beta*(market return - risk free) So by putting in values: 20.4 = rf+ 1.6(15-rf) expected market return = risk free + beta*(market return - risk free) So by putting in values: 20.4 = rf+ 1.6(15-rf) where rf = risk free 20.4 - 24 = rf - 1.6rf -3.6 = -0.6rf rf = 6
The market risk premium is measured by?
The market risk premium is measured by the market return less risk-free rate. You can calculate the market risk premium as market risk premium is equal to the expected return of the market minus the risk-free rate.
What is the relationship between financial decision making and risk and return Would all financial managers view risk-return trade-offs similarly?
return is a reward gained from investing or the reward from employing assets in a company. risk is the degree of uncertainty of possible return generated from an investment
If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 If the market risk premium increased to 6 percent what would happen to the stocks required rate of return?
If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 If the market risk premium increased to 6 percent what would happen to the stocks required rate of return?
The higher the potential return the?
higher the risk for an investment
