What are the main categories of investors in terms of risk taking behavior Risk

What are the main categories of investors in terms of

This preview shows page 1 - 3 out of 6 pages.

3.What are the main categories of investors in terms of risk taking behavior?Risk plays an important role in affecting the decision making of the investor. It affects different types of investors in different ways. Some investors like risk taking and some avoid to take risks. Following are the most important types of investors according to their risk taking behaviors. a.Risk NeutralRisk neutral is a type of investor who is not entirely concerned with the risk or rate or return on his/her investment. b.Risk taker
Image of page 1
Risk taker or risk lover is a type of investor who is only concerned about the rates of return onthe investments. He/she is never afraid of taking risks while investing in stock or commodities. He/she is always ready to take high risks to earn high rates of returns on his/her investments. Risk taker investor has a very high tolerance for the risk. He/she also has a very strong desire of earning high rate of return on investments.c.Risk AverseRisk averse is a type of investor who always selects the investment with low risk. This type ofinvestor is always concerned with the amount of risk rather than the rate of return on the investment. A risk averse investor avoids adding high risk securities in his/her portfolio. 4. What is the meaning of beta? How is it used to calculate k, the investor’s required rate of return? Beta indicates the responsiveness of a security's returns to changes in the market returns. Beta is multiplied by the market risk premium and added to the risk-free rate of return to calculate a required rate of return. 5. Suppose you are buying a stock of Apple for $130. It is going to pay you a dividend of $3. After one year you sell your stock for $150. What is the return on this stock? R= 3 +( 150 130 ) 130 =0.18 or 18% 6. Your friend James, an amateur investment analyst has been observing some corporate bonds
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 6 pages?

  • Fall '17
  • David Perry
  • Daisy Industries, Lilly Bloomy

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors