Risk and Return Introduction
Risk and return are most important concepts in finance. Risk and return concepts are basic to the understanding of the valuation of assets or securities.
Return expresses the amount which an investor actually earned on an investment during a certain period. Return includes the interest, dividend and capital gains: while risk represents the uncertainty associated with a particular task. In financial terms, risk is the chance or probability that a certain investment may or may not deliver the actual/expected returns.
The Risk and return trade off says that the potential return rises with an increase in risk. It is important for an investor to decide on a balance between the desire for the lowest possible risk and highest possible return.
Risk in investment exists because of the inability to make perfect or accurate forecasts. risk in investment is defined as the variability that is likely to occur in future cash flows from an investment. The greater variability of these cash flows indicates greater risk.
Variance or standard deviation measures the deviation about expected cash flows of each of the possible cash flows and is known as the absolute measure of risk: while co-efficient of variation is a relative measure of risk.
The term “Risk and return” refers to the potential financial loss or gain experienced through investments in securities. If an investor decides to invest in a security that has a relatively low risk, the potential return on that investment is typically fairly small. Conversely, an investment in a security that has a high risk factor also has the potential to garner higher return.
Return expresses the amount which an investor actually earned on an investment during a certain period. Return includes the interest, dividend and capital gains: while risk represents the uncertainty associated with a particular task. In financial terms, risk is the chance or probability that a certain investment may or may not deliver the actual/expected returns.
The Risk and return trade off says that the potential return rises with an increase in risk. It is important for an investor to decide on a balance between the desire for the lowest possible risk and highest possible return.
Risk in investment exists because of the inability to make perfect or accurate forecasts. risk in investment is defined as the variability that is likely to occur in future cash flows from an investment. The greater variability of these cash flows indicates greater risk.
Variance or standard deviation measures the deviation about expected cash flows of each of the possible cash flows and is known as the absolute measure of risk: while co-efficient of variation is a relative measure of risk.
The term “Risk and return” refers to the potential financial loss or gain experienced through investments in securities. If an investor decides to invest in a security that has a relatively low risk, the potential return on that investment is typically fairly small. Conversely, an investment in a security that has a high risk factor also has the potential to garner higher return.