FINANCIAL'MANAGEMENT'
CHAPTER'5
1. Introduction to Risk and Return:
- Risk: The uncertainty associated with the potential for loss or
variance between actual and expected results.
- Return: The financial advantage or loss from an funding over a
designated length.
2. Risk Types:
Systematic Risk (Market Risk):
- Affects the whole marketplace or a specific section.
- Examples consist of financial recessions, political occasions,
and hobby rate changes.
Unsystematic Risk (Specific or Idiosyncratic Risk):
- Specific to a specific agency or industry.
- Examples encompass management modifications, deliver chain
issues, and regulatory adjustments.
3. Measuring Risk:
Standard Deviation:
- Measures the dispersion of a hard and fast of values from their
mean.
- A better fashionable deviation suggests higher volatility and
risk.
4. Risk and Return Relationship:
Risk-Return Tradeoff:
- Investors expect a better return for taking on better tiers of
danger.
- Investments with doubtlessly higher returns regularly include
more volatility and uncertainty.
