Describe the risk, Concept of Risk: A person making an

Describe the risk

Reference no: EM133370293

Assignment:

INSTRUCTIONS: Answer the following questions below for each statement. Make the answer simple but easy to understand.

STATEMENT 1: Concept of Risk: A person making an investment expects to get some returns from the investment in the future. It is the uncertainty associated with the returns from an investment that introduces risk to a project.

QUESTION ABOUT STATEMENT 1:

1. What is the statement all about?

2. What is the real concept of risk?

3. What is the significance of knowing the concept of risk and how is it applied to real life situation. Give examples?

4. How is the statement number 1 related to investors?

STATEMENT 2: The expected return is the uncertain future return that a firm expects to get from its project. It is the return that an investor expects to earn on an asset, given its price, growth potential, etc; while Required Return is the return that an investor requires on an asset given its risk and market interest rates.

QUESTION ABOUT STATEMENT 2:

1. What is the difference between the two? Give examples each to illustrate the difference.

2. What is the significance of knowing the expected return and required return and how is it applied to real life situation. Give examples?

3. In one word, how can you describe the risk and return concept? Explain.

Reference no: EM133370293

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