Financial Discussion Questions

Financial Discussion Questions - 1 Infinancialterms, from...

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1. Based on what you know how would you explain the risk return tradeoff? In financial terms, the risk return tradeoff is the chance that the actual return gained  from   an   investment   will   be   different   than   the   expected   rate   of   return   for   that  investment. Measured in statistical terms, the variance between the actual rate of return  and   the   expected   rate   of   return   is   referred   to   as   standard   deviation.   Similar   to  gambling, a high possibility of investment risk is normally associated with the possibility  of a high rate of return. Conversely, a low possibility of investment risk is normally  associated with the possibility of a low rate of return.   2. How would you adapt beta to create a different measure of risk of an asset relative to the  market or a portfolio?
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