Purchase Solution

# Risk analysis for investment

Not what you're looking for?

You believe Dr. Washington is now ready to begin risk analysis and is ready to understand the risk differences among various investments. The most basic fact you want to convey to him is risk and return?the greater the risk, the greater the expected return. From there, you want to explain how expected returns can be calculated given the level of risk. You want to outline which investments are more risky and which are less risky. Create a file for uploading to the Discussion Board, which contains all of the following information.

First, graph and explain the risk profile for the following:

Risk- 08; Expected Return- 0.07
Risk- 0.12; Expected Return- 0.10
Risk- 0.20; Expected Return- 0.15
Risk- 0.35; Expected Return- 0.25

Second, given the following two investment options, explain in a paragraph what an investor would choose and why:

Investment 1, an investment that is guaranteed a 7 percent return.
Investment 2, an investment that has a probability 0.25 of earning 5%, a 0.50 probability of earning 10%, and a 0.25 probability of earning 0%.
Third, in 1-2 paragraphs, explain which of the investments below are riskier and why:

Corporate stocks
Corporate bonds
Treasury bonds
Fourth, for the class of investors below, explain which investment vehicle they are likely to choose based on its risk profile (stock, corporate bond, and Treasury bond) in a paragraph:

A retiree who is looking for a safe investment
A 28-year-old MBA graduate looking for high returns
A forty-something professional looking for good investment income

##### Solution Summary

This solution is comprised of a detailed explanation of risk analysis for investment best suit for three groups of people of more than 800 words of text plus an Excel file.

##### Solution Preview

You believe Dr. Washington is now ready to begin risk analysis and is ready to understand the risk differences among various investments. The most basic fact you want to convey to him is risk and return?the greater the risk, the greater the expected return. From there, you want to explain how expected returns can be calculated given the level of risk. You want to outline which investments are more risky and which are less risky. Create a file for uploading to the Discussion Board, which contains all of the following information.

First, graph and explain the risk profile for the following:

Risk- 08; Expected Return- 0.07
Risk- 0.12; Expected Return- 0.10
Risk- 0.20; Expected Return- 0.15
Risk- 0.35; Expected Return- 0.25

Risk is the measurable possibility of loss on an investment. Therefore, from the bar graph, we can see that the investment in higher risk instrument will give higher expected return while the investment in the lower risk instrument provide lower expected return. Thus, it shows that the greater the risk, the greater the expected return.

Second, given the following two investment options, explain in a paragraph what an investor would choose and why:

Investment 1, an investment that is guaranteed a 7 percent return. ...

##### Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

##### Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

##### Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

##### IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

##### Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.