the returns from an investment cannot be through without the risk factor. since the future is uncertain, there is always a chance that the returns will be either more or less than anticipated the greater the variation in returns. the greater the involvement of the risk factor.
the terms risk and certainly are often used synonymously. however, there is difference between two uncertainty is the case when the decision maker knows all the possible outcomes of a particular etc. but does not have an idea of the probabilities of the outcomes. risk is related to a situation in which the decision maker knows the probabilities of the various outcomes. therefore, the risk is a quantifiable uncertainty. the degree of risk may be lower for the conservative financial manager and it is higher for an aggressive financial manager. risk need to be measured in an objective way in order to know whether it justifies specific rate of return. an investor requiresa higher return from a risky project in order to compensate for the risk. the main aim is to maximize the returns with a given level of risk or to minimize the risk with a given level return. therefore for this purpose that returns and risk need to be measured. investors purchase financial assets such as share or bonds because they desire to increase their wealth. i.e., earn a positive rate of return on their investment will realize. in finance, we assume that individuals base their decisions on what they expect to happen and their assessment of bow likely it is that actually occurs will be close to what they excepted to happen. when evaluating potential investments in financial assets, there two dimensions of the decision making process is called expected return and risk.
there is the relationship between expected return and the expected level of associated risk. the nature of the relationship is that as the level of expected risk increase the level of expected return also increase .the opposite is true as well lower level of expected risk are associated with lower expected returns. this risk-return relationship is characterized as being a direct relationship. this risk return relationship is characterized as being a direct relationship or a positive relationship.
the terms risk and certainly are often used synonymously. however, there is difference between two uncertainty is the case when the decision maker knows all the possible outcomes of a particular etc. but does not have an idea of the probabilities of the outcomes. risk is related to a situation in which the decision maker knows the probabilities of the various outcomes. therefore, the risk is a quantifiable uncertainty. the degree of risk may be lower for the conservative financial manager and it is higher for an aggressive financial manager. risk need to be measured in an objective way in order to know whether it justifies specific rate of return. an investor requiresa higher return from a risky project in order to compensate for the risk. the main aim is to maximize the returns with a given level of risk or to minimize the risk with a given level return. therefore for this purpose that returns and risk need to be measured. investors purchase financial assets such as share or bonds because they desire to increase their wealth. i.e., earn a positive rate of return on their investment will realize. in finance, we assume that individuals base their decisions on what they expect to happen and their assessment of bow likely it is that actually occurs will be close to what they excepted to happen. when evaluating potential investments in financial assets, there two dimensions of the decision making process is called expected return and risk.
there is the relationship between expected return and the expected level of associated risk. the nature of the relationship is that as the level of expected risk increase the level of expected return also increase .the opposite is true as well lower level of expected risk are associated with lower expected returns. this risk-return relationship is characterized as being a direct relationship. this risk return relationship is characterized as being a direct relationship or a positive relationship.
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