Definition of 'Risk':

Jun 18th, 2015
Studypool Tutor
Price: $10 USD

Tutor description

The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment.

Word Count: 2607
Showing Page: 1/12
Definition of 'Risk':The chance that aninvestment's actualreturnwill bedifferentthan expected.Risk includes the possibility of losing some or all of the original investment.Different versions of riskare usually measured by calculating thestandard deviationof thehistorical returnsoraverage returnsof a specific investment. A high standard deviation indicates a high degree of risk.Many companies now allocate large amounts of money and time in developingrisk managementstrategies to help manage risks associated with their business and investment dealings. A key component of the risk management process is risk assessment, which involves the determination of the riskssurrounding a business or investment.A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk thatan investoris willing to take on,the greater the potentialreturn.The reason for this is that investors needto be compensated fortaking onadditionalrisk.For example:A U.S.Treasury bondis considered to be one of the safest (risk-free) investments and, when compared to acorporate bond, provides a lowerrate of return. The reason for this is that acorporationis much more likely to gobankruptthan the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.Types of RiskUnfortunately, the concept of risk is not a simple concept in fina

Review from student

Studypool Student
" Solid work, thanks. "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1830 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors