Define the concept of risk and explain how both the probability and magnitude of outcomes impact the degree of risk.

Chapter 7 -Risk Analysis

Dr. Kevin Bracker; Dr. Fang Lin; and Jennifer Pursley

Learning Objectives

After completing this chapter, students should be able to
 Define the concept of risk and explain how both the probability and magnitude of outcomes impact the degree of risk.
 Identify sources of risk and differentiate between general economic risk factors and
firm-specific risk factors.
 Explain the concepts of probability distributions, expected return, and standard
deviation for a single security.
 Calculate and interpret the expected return and standard deviation of a single
security given a probability distribution.
 Explain the concept of correlation.
 Explain the concept of expected return and standard deviation for portfolios.
 Calculate and interpret the expected return and standard deviation for two-stock
portfolios.
 Explain/diagram the concept and implications of portfolio diversification.
 Differentiate between firm-specific (diversifiable) risk, market (non-diversifiable) risk,
and total risk.
 Identify when each risk type of risk measurement is appropriate.
 Calculate and interpret beta.
 Explain, calculate, and interpret the Capital Asset Pricing Model and Security Market
Line.
 Identify potential concerns regarding the viability of the Capital Asset Pricing Model
and the Security Market Line

Nuclear Reactions

Image preview for”define the concept of risk and explain how both the probability and magnitude of outcomes impact the degree of risk.”

APA

300 words

Click the purchase button to get full answer.